Despite forecasts Friday suggesting that a category one hurricane may be spinning in the Gulf of Mexico by Monday, natural gas futures shuffled lower ahead of the weekend in sympathy with the short-term trend and following bearish supply data released on Thursday. At $5.154, August was down 10.4 cents for the session and notched its lowest settlement price since April. At 59,899 contracts, estimated volume was weak, indicating that many traders were taking a wait-and-see approach to Tropical Storm Claudette.

“This market has done a good job in taking the hurricane premium right back out of the market,” said Tom Saal of Commercial Brokerage Corp in Miami. “We ran up earlier in the week and then quickly sold right back off,” he said, adding that it is very unusual for the market to be making new lows on a Friday with a storm apparently headed for the Gulf of Mexico. Unless traders come into the office on Monday and find that there are significant curtailments and shut-ins, Saal believes the market will continue its path lower.

Another factor that enabled traders to sell with confidence was the recent memory of Tropical Storm Bill, which took a path through the central Gulf of Mexico late last month, but packed sustained winds of only 60 mph and thus had little or no impact on natural gas production. As of press time Friday, Claudette featured maximum sustained winds of only 50 mph. A tropical storm becomes a hurricane when its maximum sustained winds reach 74 mph.

By comparison, Hurricanes Isidore and Lili, which achieved category three and four intensity respectively (sustained winds of 111-155 mph), knocked an estimated 90 Bcf off the market during a four-week period last October.

Atlantic Basin tropical cyclones were not the only thing on traders’ minds Friday. There was residual selling following Thursday’s news that a whopping 111 Bcf was added to underground storage facilities during the prior week. According to the Energy Information Administration, storage increased to 1,773 Bcf as of July 4. Because the injection was greater than last year’s 67 Bcf refill, the previous week’s 97 Bcf refill and the general 95-100 Bcf range of market expectations, it was universally considered bearish by market watchers, traders and analysts.

The price reaction spoke for itself as traders participated in a marathon selling event Thursday that pushed August futures 26.2 cents lower.

Looking ahead, early expectations for the next storage report center on a 85-95 Bcf build, which if realized would easily eclipse the year-ago injection of 69 Bcf as well as the five-year average refill of 76 Bcf.

While fundamental analysts might suggest that the string of hefty storage injections has given the market the green light to dive beneath the $5.00 mark, technical traders are still cautiously bullish. Trusting Elliot Wave analysis, Craig Coberly of GSC Energy in Atlanta believes the correction lower has run its course and that prices should start to move higher. “The negative reaction to the EIA report retraced about 74% of the rally we’ve had off the July 2 low…This implies the dominant trend is higher,” he wrote in a note to customers Friday.

On the downside, a break of $5.08 would “probably” be sufficient to invalidate Coberly’s bullish outlook. Trading below $5.00, however, would invalidate the bullish outlook with “near certainty,” leading to a likely decline to the low $4.00s area, he said.

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