After shuffling to new 16-month lows for the second session in a row Thursday, natural gas futures steadied in the afternoon as several large commercial accounts supported the market with their buying presence. The September contract finished at $2.811, down 3.7 cents for the session but almost a nickel higher than its $3.765 low.

According to sources polled by NGI Thursday, the futures market was demoted in reaction to the weakening of then Tropical Storm Dean over the Bahamas as well as in anticipation of continued mild weather for the Southeast U.S. next week. Also of impact, sources agreed, was continued concerns over the record-breaking pace of storage injections this summer. The American Gas Association announced that 136 Bcf was injected into underground storage facilities during the two week period ending Aug. 17, revising a prior report stating that only a net 3 Bcf had been injected into storage during the week ending Aug. 10.

According to the latest six- to 10-day forecast released yesterday by the National Weather Service, below normal temperatures are expected across a large swath of the Southeastern U.S. extending from Eastern Texas to Delaware early next week. Meanwhile, above normal temperatures will be confined to the sparsely populated area from the Great Lakes to Idaho.

“The news just keeps getting better for bears,” a Houston-based trader said in reverence to the price-negative factors at work yesterday. If it’s not storage, then it’s the weather,” he lamented.

And while a price collapse–possibly to $2.00–is increasingly being bandied about trading rooms from Houston to New York, not everyone is convinced the market’s fate is sealed. George Leide of New York-based Rafferty and Associates remains “cautiously bearish” and points to the market’s inability to probe very far beneath the $3.00 level since breaking it more than a month ago. “If you were a seller at $2.95, you have suffered though some rallies up to the $3.40-60 area and all you have to show for it is 20 cents to the downside. I’d say it is the bears that have had a tougher time in the gas pit as of late.”

That being said, he is advising his clients to be sellers on the sporadic short-covering or storm-related spike. However, a move through the top of Monday’s gap lower open up to $3.265 would turn the market more neutral to bullish, paving the way for a possible extension to the $3.60-80 level. In the short-term, however, Leide admits that the market needs to make baby steps, and the first of these would be taken with a move back above previous support and now resistance at $2.95. “This market should grind lower over the next 8-10 weeks, but I do not see the calamitous sell-off quite yet,” he warned.

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