The Energy Information Administration (EIA) reported Thursday morning that 54 Bcf was injected into underground storage for the week ending Aug. 27, which was on target with industry estimates, bullish compared to historical comparisons, but bearish when held up to the injections of the last few weeks.

Traders appeared to digest the number as slightly bearish. Prior to the 10:30 a.m. EDT report, October natural gas futures were trading at $3.762, but in the minutes that immediately followed, the contract sank to a low of $3.697. After a little back and forth for the remainder of the regular session, the prompt-month contract closed at $3.751, down 1.1 cents from Wednesday's close.

Heading into the report, most industry estimates were for an injection in the mid-50s Bcf. Bentek Energy's flow model hit the nail on the head.

Citi Futures Perspective analyst Tim Evans, who had been expecting a 55 Bcf addition, said the injection was "as expected" for the week. "The 54 Bcf net injection for last week was inline with market expectations and supportive compared with the 61 Bcf five-year average for the date," he said. "This was the eleventh consecutive week with net injections below the five-year average, with the year-on-five-year average storage surplus falling from 313 Bcf to 169 Bcf over that span."

The 54 Bcf injection was also smaller than last year's date-adjusted build of 63 Bcf.

As of Aug. 27, working gas in storage stood at 3,106 Bcf, according to EIA estimates. Current stocks are 208 Bcf less than last year at this time. For the week the East Region injected 53 Bcf and the Producing Region added 7 Bcf, while the West Region withdrew 6 Bcf.

"We certainly had a bigger injection than we've had the last couple of weeks, so to some degree that is bearish," said a Washington, DC-based broker. "In general, it is hard to be a bull in this thing, but I still think prices might be coming to a bottom of sorts. The $3.610 low from Aug. 27 might be a bottom because we haven't come close to testing it in the last four sessions.

"As we arrive at Labor Day, we might find that folks haven't bought the amount of gas they might have normally acquired by this time. Volumes are low. We think the last drop in futures values was long liquidation and there is not a lot of selling left in the market. We might bounce along down here for a bit before a rally takes hold. Any rebound might take us up to a minimum of $4.080. We see the recent selling as a selling climax rather than people getting ready to pound this thing lower."

It seems as though the heat won't leave the East Coast alone. Commodity Weather Group (CWG) in its six- to 10-day forecast shows above-normal temperatures north and east of a broad arc extending from Minnesota to South Texas and eastward to the Carolinas.

"The models appear to be in good agreement on another surge of heat next week into the Midwest and East, but there are more detail debates today regarding whether the heat locks in or whether another quick cool push intrudes toward late next week," said CWG's Matt Rogers. He said CWG meteorologists favored "only slight, late-week cooling but then a warmer rebound toward next weekend. Confidence is slightly lower today due to the detail problems. The big picture still favors heat opportunities for the East and, of course, the South. The Southwest and California should see occasional heat chances, but the cooler periods still last longer."

Market veterans concede that a recent lack of volatility has made it difficult for even the most sophisticated computer models to discern the market's direction. A Texas fund manager reported that what looked to be a buy signal from his trading model was rejected by recent trading activity. "Right around $3.825 the longer-term model was trying to pick a bottom, and then today's [Wednesday] action negated the attempt. The model isn't saying the market won't go lower, but what turned out to be a buy signal didn't happen. We'll just have to wait for the next long-term signal," he said.

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