Natural gas futures staged a meager rebound on Wednesday as expectations for Thursday’s natural gas storage report were for a smaller-than-normal injection. The August contract recorded a low of $4.477 before closing the regular session at $4.616, up 6.8 cents from Tuesday’s finish.

While Hurricane Alex continued on its westerly Gulf production-sparing course and temperatures in a number of regions across the country moderated, the storage report for the week ending June 25 was expected to show that injections have fallen further from last year’s record pace. Following last week’s report that 81 Bcf was injected for the week ending June 18, the 2 Bcf year-on-year surplus fell to a 14 Bcf year-on-year deficit.

Some traders see the futures market as playing a technical game. “I wasn’t too impressed with Wednesday’s rebound,” said Tom Saal, a broker with Hencorp Futures LLC. “This $4.60 area is a key number on the charts that a lot of technicians like to keep their eye on. For now it looks like we’re stabilizing around that price level. I still caution people that the funds are still quite net short natural gas futures. Whenever they are in that position, you have to be mindful that they could start buying some back at the spur of the moment. It’s also been shown [that] when they start to make a move, they really move. They only bought back some of their positions just two weeks ago and we saw a pretty strong pop to the upside off of it.”

Saal noted that Hurricane Alex is not much of a concern. AccuWeather.com meteorologists Wednesday afternoon noted that conditions continued to deteriorate in Brownsville, TX, as the hurricane closed in. The forecasting service said Alex had the potential to strengthen to a Category 2 hurricane by the time it made landfall Wednesday night in the vicinity of La Pesca, Mexico.

“In the past few years, when a storm comes into the Gulf the market has kind of taken a Missouri-type ‘show me’ stance before they really jump,” Saal said. “However, with the oil spill in the Gulf, that adds a little more anxiety to any storm and I think the producers will likely be a little quicker to shut in production sooner in an abundance of caution.”

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) said that as of 11:30 CDT Wednesday, 31 companies had reported 919 MMcf/d in shut-ins, or 14.36% of the Gulf’s normal gas output (see related story).

Traders are circumspect about Alex. “It is difficult to place Alex in its proper place right now, in the middle of a major oil spill and in the midst of asset regurgitation,” said Peter Beutel, president of Cameron Hanover, a Connecticut-based energy consulting firm. “Long-time gas traders know that the short side in summer (in this market) works out like selling calls to collect premium. It works more than it doesn’t, and one can make good money trading with a counterattack over disappointment.

“Most storms don’t cause problems — thankfully. And if there are 15 storms in a season, it is rare to get more than two or three that end up delaying, disrupting or destroying producing, gathering or processing plants. But when we do get one of those two or three storms that have their names removed from the rotating list, then everything that one made selling futures or calls can be eliminated all at once.”

Looking at the big natural gas futures market picture, Saal said he sees consolidation. “There is definitely some sideways price action going on and we could see a little blip higher in the near term. We might be able to make it up to $5.500.”

Taking a closer look at Thursday morning’s storage report, it would appear that most industry estimates are for an injection in the mid 60s Bcf. A Reuters survey of 27 industry players produced an injection range of 59 Bcf to 74 Bcf with an average build expectation of 64 Bcf, which is the exact number that Bentek Energy’s flow model keyed in on. The research firm expects the East Region to inject 41 Bcf, while the West and Producing regions add 12 Bcf and 11 Bcf, respectively.

In its weekly storage note, Bentek noted that the shrinking storage injections are likely attributable to the warmer-than-normal temperatures covering the United States earlier than in past years.

In addition to being compared to industry expectations, the number revealed Thursday morning at 10:30 a.m. EDT will also be sized up against last year’s date-adjusted 73 Bcf build and the five-year average injection of 82 Bcf.

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