After attacking the $5 mark for the majority of the afternoon, the October natural gas futures contract finally broke below that psychological support level near the end of the open outcry session, notching a low on the day of $4.955 before settling at $4.965, down 10.9 cents on the day.

The prompt month made a valiant attempt in morning trading to push higher, reaching a peak of $5.18, but was ultimately pushed lower. October crude enjoyed a $1.88 run up to settle at $44/bbl.

“I think we saw on Wednesday the continued erosion that has accompanied this downtrend,” said Tom Saal of Commercial Brokerage Corp. “I thought we would get a little more of a rally out of [the market], but it just didn’t materialize. Locals tried to push it up initially with the very bullish API/EIA crude oil statistics, but once they weren’t able to push the market up over $5.18, then the locals decided to start selling. There was some light trade and some fund selling as well.”

Commenting on the markets break below $5, Saal found importance in the move. “We were at $7 at one time, and now approximately a month after breaking the $6 mark, we have broken below $5,” he said. “The most interesting thing about this market right now is the tremendous spread between October and the winter months. I believe it is as big as it has ever been. I have to believe that either the front or winter months are wrong. Historically, I think those spreads are normally 30-40 cents maybe, not the current 50-60 cents.” At close Wednesday, the November, December and January natural gas futures contracts closed at $5.566, $6.201 and $6.581, respectively.

On the hurricane watch, Category 4 Frances was displaying wind speeds of 140 mph Wednesday night. “Stormwise, we are hearing that there are two kinds of tracks for Hurricane Frances,” Miami-based Saal said. “One has it going right over top of us and into the Gulf of Mexico, just like Hurricane Andrew. We all know what happened when Andrew went into the Gulf. The other track has Frances hitting the Carolinas. The only hurricane I want to see is on the University of Miami’s football field,” Saal added.

Andrew, which cut a swath across Florida and into the Gulf of Mexico in August of 1992, shut in nearly 20%, or 2.75 Bcf/d of Gulf Coast production for an extended period late in the year (see Special Andrew Report on intelligencepress.com).

At 5 p.m. (AST) Wednesday, the National Hurricane Center said Hurricane Frances was lashing the Turks and Caicos Islands and was headed for the southeastern Bahamas. The NHC said that a hurricane watch would likely be issued for portions of the Florida East Coast Wednesday night. The storm was moving toward the west-northwest at 15 mph.

Awaiting the natural gas storage report Thursday morning, Saal said it appears that storage will probably be full Nov. 1. “I am looking for a 78 Bcf build Thursday morning,” he said. “What I am hearing is mostly estimations within the 70-85 Bcf range.”

Citigroup’s Kyle Cooper said his final estimation for the week’s EIA report looks for a build between 76 and 86 Bcf. Assuming the number comes within expected ranges, it will eclipse last year’s 67 Bcf as well as the 62 Bcf five-year average.

“For inventories to reach 3,200 Bcf, injections must now only average 53 Bcf per week until the first week in November,” Cooper said. “To eliminate the surplus to last year, inventories must fall 24 Bcf per week below last year. A build in our range would be considered slightly bearish on a temperature adjusted basis.”

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