Following a delayed opening as Nymex observed the tragedy of two years prior, natural gas futures dove lower Thursday as Hurricane Isabel took a turn to the northwest and the Energy Information Administration reported a hefty 97 Bcf weekly storage injection. The October contract dipped to $4.685 in the moments following the 11:15 a.m. ET storage report, but then rebounded to close at $4.738, down 23 cents for the session.

According to the EIA, working gas levels rose to 2,486 Bcf. The 97 Bcf injection was seen as slightly bearish versus the majority of expectations in the 85-95 Bcf range. It was undeniably bearish versus last year’s 74 Bcf build, the five-year average of 68 Bcf and last week’s 70 Bcf report. Working gas stocks are now only 146 Bcf less than the five-year average. With roughly eight weeks left in the typical refill season, storage injections need to average 64 Bcf a week to reach the 3,000 Bcf level.

Packing maximum sustained winds of 160 mph, Hurricane Isabel Wednesday afternoon became the first Category 5 hurricane since Mitch in 1998. However, because she is located out in the middle of the Atlantic and is moving only at a sluggish 9 mph, Isabel poses an immediate threat to no one. In fact, the storm will just be approaching the eastern Bahamas by next Tuesday, said Michael Schlachter of New York-based Weather 2000.

“[I]t is difficult to say right now with any level of confidence that the storm will or will not make it into the Gulf of Mexico… If I had to put odds right now, I would say there is a 35% chance of reaching the Gulf — either directly or after first passing over southern Florida. The 50/50 target right now is Jacksonville FL,” he said, referring to the equal chance the storm has of making landfall either north or south of the city.

Traders agreed that the rally and retreat witnessed in gas futures over the last 24 hours is attributable to changes in various forecasts based on minute variations in the direction of Isabel. Going forward, they expect that volatility will continue until forecasters have a clear bead on where the hurricane is headed.

However, as is often the case in the futures market, fundamentals dictate the price direction and technicals decide the size of the move. “We hit a number of buy stops on the way up [Wednesday],” said George Leide of Rafferty Technical Research in New York. “It was sort of a [bogus] rally. We failed to break above $5.00 and now we are seeing the consequences of that.”

Leide said he’ll remain cautiously bearish unless or until the market breaks above $5.00. In the intra-day, he might suggest selling against light resistance at $4.82-86, looking for a move down to $4.65-69.

But just as Leide is getting a bit bearish, Tom Saal of Commercial Brokerage Corp. is beginning to rear his horns. “I’m getting kinda bullish here. Although these rallies have lacked the staying power, the market is making higher highs and higher lows. We saw a good deal of fund buying Wednesday.”

In the daily chart, he also targets the $5.00 level, which in addition to being a nice round number, is also the 50% extension of the Monday-Tuesday trading range from this week. According to Market Profile technical analysis, once the market breaks out of its Monday and Tuesday range, it will typically tack on an additional 50% in that direction. Since the market broke higher Wednesday, Market Profile called for a move to roughly $5.00 (Monday’s $4.885 high plus 12 cents). “We only made it to $4.985 [Wednesday]. I think we could see another buying push [Friday],” Saal said.

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