Following a topsy-turvy span of trading in which prices fell Thursday as quickly as they rose Wednesday, natural gas futures sputtered sideways to slightly higher Friday as traders gently covered shorts ahead of the weekend and the Monday expiration of the August contract. August closed 3.4 cents higher at $2.936. For the second day in a row, volume in the gas pit was heavy with an estimated 171,719 contracts changing hands.

Looking back at last week’s price activity, both bull and bear can make the case that it was a victory in their favor. While the market’s ability to post a higher low ($2.80), a higher high ($3.08), and a higher close could be construed as supportive, bears would argue that the fundamental situation is even more price-negative than ever.

With last week’s storage report featuring another in a string of bearish (64 Bcf ) injections, there is a growing sense that the market is going to reach the full level of storage way before the historical beginning of withdrawal season on Nov. 1. According to the EIA, there was 2,486 Bcf of working gas in storage as of July 19. Stocks were 334 Bcf higher than at the same time last year and 364 Bcf above the five-year average of 2,122 Bcf. At the current average injection rate of about 66 Bcf, the market will reach the 3,200 Bcf “full” level in less than 10 weeks.

For a Washington, DC-based broker, last week’s storage report served as a big slice of reality pie for a market that had been desperately trying to claw its way higher. “The weather was pretty warm and we still managed to inject 64 Bcf into the ground. As we move into August, the average high temperatures get lower and degree day calculations will be on the downswing. Unless we get an prolonged August heat wave or a substantial hurricane threat, prices are headed lower,” she warned.

As for last Wednesday’s 15-cent rally, the broker was not impressed. “It was more a euphoric reaction to the rise that day in stock prices and crude oil futures than anything. Certainly not in line with the underlying fundamentals of natural gas.”

Looking ahead to expiration-day Monday, traders will likely take their first price-direction clue from updated weather forecasts. Last week the National Weather Service was calling for above-normal temperatures in the eastern half of the country, which if realized could prompt some sympathy buying. Also important at expiration is the cash versus futures spread, which, by virtue of a double-digit loss in cash prices and a small gain in futures prices, all but disappeared Friday. “If hot weather prompts utility buyers out into the market and cash prices rise, the futures market is likely to follow,” a Houston trader said.

In daily technicals, Tom Saal of Pioneer Futures in Miami sees an area of negative development between $3.02 and $3.10 that should be filled in for prices to complete a normal prices distribution curve. On the downside, mode support exists at $2.88, he said.

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