Natural gas futures traders have, over the course of the last decade, demonstrated the uncanny ability to look past an in-your-face fundamental indicator and focus instead on an obscure technical benchmark or their perception of data yet-to-be-released. Yesterday was a textbook example of the latter being played out as traders ignored another hefty storage injection to focus instead on their expectations of next week’s release. This was evident in the market’s price action late yesterday afternoon as the August contract rebounded from its pre-AGA lows to finish with a 6-cent gain at $3.342.

Heading into yesterday, the market had lost a total of 74.2 cents during the last four Wednesday trading sessions (prior to the holiday last Wednesday).

According to the American Gas Association, 110 Bcf was injected into underground storage facilities last week, bringing working gas levels to 59% full at 1,932 Bcf. The refill was large compared to the same week last year (97 Bcf) and to the five-year average (82 Bcf). It also was the third largest injection this season. However, 110 Bcf was well-within the market’s consensus 100-115 Bcf estimate, leaving traders to suggest the storage news had already been reflected in the current price level.

As evidenced by yesterday’s strong close, bulls are beginning to cautiously rear their horns, and maybe for good reason. With storage 59% full, the heaviest injections are likely already behind us and analysts are already starting suggest next week’s report (covering this week’s activity) will feature a sub-100 Bcf injection — something the market has not seen since May.

Based on National Oceanic and Atmospheric Associations’ (NOAA) forecast for both heating degree days and cooling degree days this week, Thomas Driscoll of Lehman Brothers estimates a 100 Bcf injection will be released by the AGA next Wednesday, adding to the current year-on-year surplus of 199 Bcf.

Another supportive factor, although somewhat less quantifiable, in this market right now is the strong commercial buying that was seen when prices dipped near the $3.00 level, said Ed Kennedy of Miami-based Pioneer Futures. “We saw good buying, by one large player in particular, as prices approached the $3.00 mark. Ultimately, weather and storage hold the key to this market, but if you’re bullish it doesn’t hurt to have a big commercial buyer on your side.”

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