Despite receiving the news that a smaller-than-normal 29 Bcf was injected into underground storage for the week ending July 30, natural gas futures traders took the news in stride as another round of "buy the rumor, sell the fact" unfolded. The September contract closed at $4.598, down 13.9 cents from Wednesday's close.

After working a few pennies higher to $4.825 ahead of the 10:30 a.m. EDT Energy Information Administration (EIA) report, the September natural gas futures contract sold off in the minutes that followed. Just before 1 p.m. EDT, the prompt month contract sunk to the day's low of $4.556.

"I was a little surprised why someone would come in and sell hard on a 29 Bcf injection. It wasn't a 129 Bcf injection," said Tom Saal, a broker with Hencorp Futures LC. "It may be that we're getting closer to 3 Tcf in storage, so some folks who were holding length, simply got out of their positions. The selling happened so fast and it could have just as easily been buying considering the number."

Saal also said the migration to electronic trading over the last few years likely played a part in the sizeable move. "I think the large sell-off was a symptom of the electronic market because liquidity at any time can be thin. When volume comes in, it can move the market dramatically with no build-up, especially after a storage number comes out," he told NGI. "This market is notorious for people not having resting orders on the Globex electronic exchange, so if the selling comes in, there are no buy orders on the other side to absorb it."

Heading into the report, most industry estimates were for an injection of around 30 Bcf. A Reuters survey of 28 industry players produced an injection range of 25 Bcf to 44 Bcf with an average build expectation of 33 Bcf. Bentek Energy's flow model projected a 27 Bcf injection for the week.

Citi Futures Perspective analyst Tim Evans, who had been on the record with a 42 Bcf estimate, called the actual 29 Bcf build "supportive," and noted that a clear trend was in development.

"The 29 Bcf build in natural gas storage for last week was below the median expectation as well as below the 47 Bcf five-year average," he said. "The year-on-five-year storage surplus that was 325 Bcf back on May 7 is now down to 221 Bcf, the lowest since April 2. This was also the seventh consecutive weak of injections below the five-year average. The only question now is whether the market can convert bullish storage data into higher prices."

The build was also much smaller than last year's date-adjusted 67 Bcf injection.

As of July 30, working gas in storage stood at 2,948 Bcf, according to EIA estimates. Stocks are now 132 Bcf less than last year at this time. For the week the East Region injected 34 Bcf while the West Region added 3 Bcf. The Producing Region withdrew a surprising 8 Bcf.

Credit Suisse analyst Teri Viswanath noted that the injection was "inline" with her firm's own 30 Bcf prediction.

"Taking a closer look at storage on a regional level, the East Consuming region is currently -78 Bcf (-4.96%) below last year, the West Consuming is +34 Bcf (+7.69%) above last year, and the Producing region is -88 Bcf (-8.25%) below last year," she said in a research note.

Production bears will be forced to defend their case next week as well. The National Weather Service predicts for the week ended Aug. 7 above-normal accumulations of cooling degree days (CDD) across major energy markets. New England is expected to see 60 CDD, or 16 more than normal, and New York, New Jersey and Pennsylvania are forecast to have 78 CDD, or 20 more than normal. The Midwest from Ohio to Wisconsin is anticipated to bake under 88 CDD, or 33 more than its normal tally.

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