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Storage-Wednesday Has Something for Both Bulls and Bears

Storage-Wednesday Has Something for Both Bulls and Bears

Speculation around the much anticipated storage report continued to run rampant yesterday on trading floors across the natural gas industry and that coupled with steady fund buying was enough to lift the futures market higher for the third day in a row. The September contract raced off to a fast start, but was unable to retest the $2.72 high set last Thursday. After notching a $2.66 high trade around 10:30 EST the prompt month was left to chop sideways before eventually settling up 4.4 cents at $2.642.

But all the hype surrounding the weekly supply data seemed well deserved when the American Gas Association said that only 26 Bcf was injected into underground storage facilities last week. That figure fell short, not only of last year's 79 Bcf refill, but also compared to the range of market expectations centered on a 30-50 Bcf refill. Total working gas in storage now stands at 2,306, 87 Bcf less than a year ago (see chart). However, at least one trader was quick to dismiss the scant injection. "[Storage] does not come as a surprise to me. I had 30 [Bcf] in our office pool," bragged a Houston based marketer admitting that he won the pool. "There were some who looked for as 45 [Bcf] but that sort of number defied logic considering the oppressive heat and strong demand for electric generation last week." He may have not been alone because shortly after the storage report was release prices tumbled back down to the $2.60 level.

However, another trader pointed to the latest six- to 10 day weather forecast released by the National Weather Service (NWS) about the same time Wednesday afternoon as a contributing factor to the price erosion. The NWS said the entire Northeast, most of the Upper Midwest, and California should expect below-normal temperatures for the August 10-14 time period. Normal temperatures are forecast over parts of the central plains, Southeast and east of California, with the remaining third of the country, including most of Texas, slated for above normal readings.

Looking ahead, a Gulf trader feels that last week's high of $2.72 is the number that needs to be retested in order for the bulls to really get the market rolling.

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