Natural gas futures dropped lower at the open Tuesday as traders returned from the holiday weekend to a less than supportive fundamental outlook. In addition to the milder temperatures expected in September, weather forecasters also played music to bears’ ears by predicting that Hurricane Fabian poses more of a threat to New England than to the Gulf Coast states. The October contract was hit heaviest by the selling, dropping 9.2 cents to close at $4.639. At 63,392, estimated volume was moderate.

Though the latest National Weather Service six- to 10-day forecast calls for above-normal temperatures for a good part of the northern half of the country, it also calls for normal temperatures across an even larger area spanning the Southeast and south central United States. Below normal temperatures, meanwhile, are expected to be confined to the Pacific Northwest and the desert Southwest.

But bearish weather was not the only cause of Tuesday’s price slide. Also at work were expectations for another installment of price negative storage data this Thursday. Early consensus estimates call for a 70-80 Bcf refill, which would exceed last year’s 65 Bcf add as well as the five-year average of 59 Bcf. Marketwatchers are especially eager for this week’s figure following last Thursday’s smaller-than-expected 53 Bcf build. “Thursday’s storage report will be key for either re-establishing the bearish balance in the market or confirming the shift suggested by last week’s data,” Tim Evans of IFR Pegasus said in a note to customers Tuesday.

However, even if the storage injections remained moderate again last week, the damage to the technical outlook may have already taken its toll. While not ready to abandon the uptrend entirely, Craig Coberly of GSC Energy in Atlanta admits that Wednesday’s price action will be crucial. “By moving below $4.59, the market has shifted probabilities to the bearish side. Additional support at $4.54 held [Tuesday] and has some possibility of halting the decline, but a break of that level would likely lead to a test down to objectives at $4.00-13,” he said.

Coberly’s technical trading system relies heavily on Gann lines of support and resistance, which are drawn using predetermined slopes off previous market highs or lows. For example, breached support at $4.59 was consistent with a 0.5-cent/day uptrend line drawn off the January 2002 low. Support at $4.54, meanwhile, is drawn off the August 2002 low with the same 0.5-cent/day slope.

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