Buoyed by another spectacular session of crude oil trading, the September natural gas futures contract inched 5.1 cents higher Thursday to $5.712 as an early attack from the bears was thwarted by consistent, end-use buying support, according to brokers. The storage report, featuring an 83 Bcf injection, was seen as mostly a neutral event.

Crude oil futures, which are traded just a stone’s throw away from natural gas at Nymex, shot to another all-time high Thursday on supply concerns following the move by the Russian government to bar its oil giant, Yukos, from accessing its bank accounts. September crude closed at $44.41/bbl, up $1.58 for the session and just below its freshly minted, all-time top at $44.50.

In comparison to crude, however, natural gas supply is not really a concern. According to the latest data by the Energy Information Administration, gas in storage now stands at 2,380 Bcf, up 83 Bcf for the week ending July 30. At first glance, the 83 Bcf refill was smaller than ICAP’s EIA storage derivatives auction strike indicating a 88 Bcf build. However, more thoughtful evaluation of the weekly storage report reveals that at 83 Bcf, the pace of storage injections last week easily trumped the 53 Bcf five-year average as well as the 76 Bcf injected during the same week last year.

Thomas Driscoll of New York based Lehman Brothers said the overall price level and the market’s behavior right now point to a season-ending storage inventory of 3,100 Bcf, slightly above the five-year average. Last year, storage peaked at nearly 3,200 Bcf.

Edward Kennedy agrees that storage is getting filled rapidly, but insists this can be viewed bullishly. “The buying you saw [Thursday] was strip buying by end users who view these prices favorably versus the $5.60 average cost of gas in storage last winter…This buying is driving the front month up and the winter months down as they buy gas for injections and sell the out months.”

Looking at the nearly $1.25 spread that currently exists between September and January futures, Kennedy believes there is room for more storage arbitrage. “Someone is paying you $1.25 to store your gas for winter. That should certainly cover the cost of storage and allow for a profit,” he said.

In daily technicals, support is seen first at Thursday’s $5.62 low. More important support, chips in Tim Evans of IFR Pegasus in New York, is the weekly uptrend dating back to January 2002. On the upside, little resistance is seen until the $6.01-09 area spanning the gap notched by Monday’s lower open.

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