With Hurricane Dolly holding its anticipated course and impacting Texas near the Mexico border Wednesday afternoon (see related story), traders resumed their pounding on the energies Wednesday as front-month natural gas futures closed below $10 for the first time since April 11.

August natural gas futures on Wednesday recorded a low of $9.740 before closing out the session at $9.788, down 27.9 cents from Tuesday’s finish. Likewise, September crude values continued to slump by recording a low of $124.30/bbl before closing at $124.44/bbl, down $3.98 from Tuesday.

“I’m not quite sure what is going on here. The market is obviously sliding south — and not just in natural gas. The entire energy complex is taking a load off,” said Tom Saal of Commercial Brokerage Corp. in Miami. “I thought natural gas would stabilize around $10, but it appears likely we won’t even do that. We are just methodically grinding lower here.”

Energy traders proved correct in mostly ignoring the Gulf of Mexico storm that ultimately became Hurricane Dolly. “While Hurricane Dolly was always on the radar of energy traders, the forecasted track of the storm always had it coming through the southern Gulf of Mexico, well below the key oil and gas production areas,” Saal said. “Even though it was in the Gulf, everyone was pretty much in agreement with where Dolly was going to go. As a result, the storm was discounted, so now we’ll wait for the next one.”

Saal noted that calling support in a market that has been falling as fast as natural gas is not always the easiest thing to do. “Looking at my charts, I’ve got nothing significant until $9.500. It has been a while since we have been at these prices, so what is happening is as we move down we run into some of the same factors that were pushing us higher just a few short weeks earlier. We have some gaps of illiquidity with some fundamental background, but it looks more like the speculators — who were helping to push us higher just a short time ago — are getting out of their length right now. It looks like it is happening to all of the energies.”

Followers of seasonal trends note that the decline of front-month futures may still have some more to go. “The average summer decline in natgas is a 33% loss in spot contract value,” Walter Zimmerman of United Energy said. The $13.694 market high reached July 2 came somewhat late, but it “is making up for lost time. To Tuesday’s $9.889 low, natgas is already down 28% from the peak.”

In order to make the average decline, Zimmerman calculated that spot futures would have to fall to $9.175, which would be about two days’ trading at current rates. “Bulls need a candlestick reversal pattern and bullish RSI [Relative Strength Index] divergence, and ideally from a major Elliott ratio retracement,” he said in a Wednesday morning note to clients.

Looking at Thursday morning’s natural gas storage report for the week ended July 18, much of the industry is looking for a build in the 80s Bcf. A Reuters survey of 22 industry players produced an injection expectation range from 72 Bcf to 105 Bcf with an average build prediction of 83 Bcf. The number revealed by the Energy Information Administration at 10:35 a.m. EDT will be compared to last year’s 70 Bcf injection for the date-adjusted week and the five-year average build of 57 Bcf for the similar week.

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