After looking a little like a deer caught in the headlights in the minutes immediately following the storage report (78 Bcf injection), the natural gas futures market bolted higher Thursday as technical market features trumped an increasingly bearish storage situation. The September contract carved out a new, one-month high at $5.34 by 11:30 a.m. ET, and then slid back a few cents in the afternoon to close at $5.275, up 15.6 cents for the session.

According to the Energy Information Administration, 78 Bcf was added to underground storage facilities last week, bringing the level of working gas to 2,266 Bcf as of Aug. 15. Although the 78 Bcf refill came near the bottom end of the absolute range of expectations focused on a 75-90 Bcf figure, it was inline with the common range of expectations clustered in the 75-80 Bcf area.

While the report could be construed as neutral or even a bit bullish versus expectations, it was undoubtedly bearish versus historical figures. Last year at this time the market only injected 37 Bcf and the five-year average build is calculated at 57 Bcf. Accordingly, the deficit to last year (391 Bcf) and the five-year average (182 Bcf) continued to shrink with the report. With 11 weeks left in the traditional injection season, the market needs to inject 67 Bcf a week to reach the 3,000 Bcf target by Nov. 1.

To add to the bearish storage outlook, a discrepancy between the monthly and the weekly EIA storage data attracted the attention of market-watchers. After closely tracking the weekly data in February and March, the monthly data for the end of April exceeded the weekly survey results for that period by a considerable 85 Bcf. Observers wonder whether those differences increased over the summer and whether the market should be looking for a substantial upward revision to weekly storage levels (see related story).

While there was certainly enough price-negative news in which bears could sink their claws Thursday, the storage injection was just low enough to leave it open to interpretation. The market responded by chopping sideways-to-higher in the 25 minutes following the 10:30 a.m. ET release. However, once the September contract moved back above Wednesday’s close at $5.119, the rout was on. Prices advanced 20 cents in 30 minutes from 10:55 a.m to 11:25 a.m.

George Leide of New York-based Rafferty Technical Research was not surprised by the market’s behavior despite what he considered to be a “neutral” storage report. “Since we moved back above $4.99, the tide has turned to the upside for technicals. This market has done a good job of repairing the charts. Above $5.25-26, the market faces additional selling at $5.32-35. A break through that level could lead to a push back to the $5.61-65 area,” he suggested.

Technically, the market is developing in bullish fashion, making a seasonal low at $4.58-615 in late July and early August right on schedule,” said Tim Evans of IFR Pegasus in New York. “Yet, on a larger scale, this may only be an upward correction of the major June-July drop that took September futures from $6.68 down to $4.58.” The market’s degree of follow-through past the $5.28 level will “suggest whether natural gas really has the makings of a new bull market,” said Evans.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.