Punctuated by a 5-cent free-fall in the last five minutes of trading, natural gas futures slumped lower yesterday as traders priced yet-to-be-released storage data — guilty of being bearish, until proven innocent — into the market. With that the September contract concluded its penultimate trading day with a 12.9-cent loss to close at $2.415.

Traders polled by NGI yesterday were mixed on whether the recent price slide, which currently stands at nine days, is justified or not. For some, the trio of relatively mild temperatures, plentiful supply and inactive tropics more than accounts for the 30% price pullback. However, other traders expressed some uneasiness over the selloff, sensing that the move was overexaggerated and built partly on bearish expectations ahead of this afternoon’s storage report. Despite the volatility attributable to the AGA’s storage revision last week, traders and market watchers were right back out there this week, trying to estimate the report. Most look for a net refill in the 78-90 Bcf range, which would easily surpass last year’s 52 Bcf injection as well as the five-year average injection of 66 Bcf.

Based on temperatures (Cooling Degree Days [CDDs] weighted by gas home cooling customers) last week that were 5.6% warmer than last year, roughly 4% warmer than the 10-year average and 2.7% warmer than the prior week, Robert Morris of Salomon Smith Barney expects the American Gas Association will report a 78-88 Bcf injection today. If his prognostication is correct, the year-over-year storage surplus should widen to nearly 360 Bcf, or nearly 17% above last year, compared with a 411 Bcf year-over-year-storage deficit at the end of March.

For George Leide of Rafferty and Associates, the most disheartening feature of yesterday’s trading from a bulls’ perspective was the market’s inability to rebound more than a nickel after making a fresh low late in the session at $2.42. “The sellers have really put a lid on this market. We bounced late, but could barely manage to get past $2.465. That’s a pretty paltry rally after making new lows.”

Leide agrees that to an extent, a large storage figure has already been priced into the market. However, that does not necessarily make him a buyer if the storage figure is lower than expected. Instead, he believes it would take a injection in the 60s to prompt the market to cover shorts. Conversely, a refill of 85 Bcf or greater could lead to the market taking another leg lower, he reasoned.

Prompt month support is seen first at $2.33 and then again at $2.08-12. September will encounter last day resistance at the aforementioned $2.47 level ahead of more substantial selling at $2.58.

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