Coming off sharp gains earlier in the week, and with the market still mulling the balance implications of a larger-than-expected weekly inventory injection, natural gas futures were trading slightly lower early Friday. The October Nymex futures contract was down 1.9 cents to $2.416/MMBtu at around 8:40 a.m. ET.

Except for the already hotter-leaning European model, the weather data added several cooling degree days (CDD) to the outlook overnight, with hotter trends focused around Sept. 12-15 “due to stronger high pressure across the southern and eastern U.S.,” according to NatGasWeather.

“But even with recent hotter trends,” the next several Energy Information Administration (EIA) weekly storage reports are on track to show injections near or above historical norms, the forecaster said. This means that “even with solidly above normal national CDDs, builds still are struggling to print lighter than five-year averages.

“...Bulls have been solidly in control the past few weeks...but prices may have rallied too far too fast, so a correction could be due. To our view, it’s likely going to take considerably hotter trends to justify $2.50.”

The EIA on Thursday reported an 84 Bcf weekly injection into U.S. natural gas stocks, on the high side of expectations and higher than both the 64 Bcf injection recorded last year and the five-year average build of 66 Bcf. Total Lower 48 working gas in underground storage stood at 2,941 Bcf as of Aug. 30, 383 Bcf (15.0%) above year-ago levels but 82 Bcf (minus 2.7%) below the five-year average, according to EIA.

With the latest injection the market “continues to reflect oversupplied conditions,” according to Tudor, Pickering, Holt & Co. (TPH) analysts. Based on this week’s EIA data, they calculated a 1 Bcf/d oversupply after adjusting for weather.

“After a slow start, degree days for this year’s injection season now sit almost dead in-line with the five-year average, but despite the neutral weather, cumulative injections are 44% ahead of norms and are mirroring the trajectory of 2015,” the TPH team said. “For gas bulls, 2015 is not a comparison you want, as rapid injections that year resulted in sub-$2 pricing the following spring.

“In our view, the rally in gas prices this week is not backed by fundamentals, as most supply/demand inputs are trending bearish. On a week/week perspective, supply is up 0.2 Bcf/d,” liquefied natural gas feed gas demand is down about 0.5 Bcf/d, and Canadian imports are up 0.5 Bcf/d.

Genscape Inc. analysts viewed the 84 Bcf injection as indicating 0.9 Bcf/d of slack in the market versus the five-year average when taking into account degree days and normal seasonality.

“A large decline in CDDs versus the prior week drove total power demand/generation lower and reduced gas burn by more than 5 Bcf/d week/week,” senior natural gas analyst Rick Margolin said.

October crude oil futures were down 96 cents to $55.34/bbl at around 8:40 a.m. ET, while October RBOB gasoline was trading about 2.7 cents lower at $1.5189/gal.