After dipping down in overnight Access trading, September natural gas futures continued the plunge in Wednesday’s regular session, reaching a low of $5.64 before rebounding slightly higher to settle at $5.661, down 15.5 cents on the day.

All of this was accomplished despite crude reaching yet another all-time record in overnight trading. The September futures contract hit $44.34, 10 cents higher than the old record set less than 24 hours before. Despite the new high, bearish oil stock reports pushed oil futures lower Wednesday afternoon to settle at $42.83/bbl, down $1.32 on the day.

The $5.80 support level from Tuesday was no match for natural gas futures Tuesday night. The natural gas prompt month toyed with the $5.80 support level on Tuesday, but ultimately settled higher at $5.816.

“Natural gas futures went down pretty quickly in the overnight Access market and [on Wednesday] morning,” said Steve Blair of Rafferty Technical Research in New York. “We have touched into near-term minor support levels around the $5.68 level. We’ve got some near-term support there and some near-term support a little lower at $5.625,” Blair said Wednesday at noon.

He noted that there are several things at work currently. “I think there are a lot of people on vacation right now, not only here, but throughout the industry, so there is a little bit of non-participation in the market.”

In addition, he said most people are now convinced that Tropical Depression Two is steering clear of Gulf production in favor of an Atlantic path. “I think the storm is a non-event for the moment,” Blair said. “I believe everyone is looking to the storage number release Thursday, where most people are looking for something in the 80-90 Bcf range.” At press time, the National Hurricane Center was reporting that Tropical Depression Two had degenerated into a tropical wave in the eastern Caribbean Sea.

With storage currently refilling at a rapid pace, Blair said a lot of people believe that by the time the industry enters the heating season, storage will be quite healthy. “I think some of the fundamentals are starting to really sink in.”

Following ICAP’s EIA storage derivatives auction from 3-4 p.m. EDT on Wednesday, the number moved from the pre-auction level of 84.9940 Bcf to 88 Bcf. In addition to having to go up against the 53 Bcf five-year average, Thursday morning’s storage report for the week ended July 30 also will be compared to last year’s 76 Bcf injection for the same week.

Calling the market from Tuesday night’s Access session, GSC Energy’s Craig Coberly said he believes the brief consolidation or pause in the decline is likely complete. He noted that with the decline back in motion, prices are likely to trend lower to the long-term support line at the $5.52-5.53 level.

“The less likely alternate short-term possibility is that gas may consolidate a little longer before resuming the decline. If so, upside potential is likely capped by the…Gann support line in the $5.95-5.97 range,” he said. “Gas would have to trade above the $6.22-6.28 resistance area to invalidate the short-term and intermediate-term bearish outlook.”

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