Exhibiting a symmetry not often seen in the hectic world of natural gas futures trading, prices spiraled lower Thursday on bearish storage data, exactly retracing the gains seen following last Thursday’s bullish storage report. Last Thursday, the Energy Information Administration (EIA) reported a lower-than-expected 74 Bcf injection and this week the EIA reported a greater-than-expected 82 Bcf refill. In both instances, the price reaction was immediate and substantial. On Aug. 7 the market leaped 33.7 cents higher, while Thursday the market dropped 28.8 cents to close at $4.891.

At 2,188 Bcf as of last Friday, storage stood 432 Bcf less than the same time last year and 203 Bcf below the five-year average. While those deficits may seem bullish, the shortfall has shrunk considerably since peaking in April. Bears, meanwhile, had ample positive news Thursday. Not only did the 82 Bcf figure exceed the year-ago injection of 53 Bcf as well as the five-year average refill of 51 Bcf, it surpassed the range of market expectations clustered in the 65-75 Bcf range. With roughly 12 weeks left in the typical refill season, the market needs only to inject 68 Bcf/week to reach the widely accepted target level of 3,000 Bcf by Nov. 1.

Natural gas prices rallied following the previous Thursday’s storage report, prompting many technical traders to speculate that the summer low has been made and prices will work higher into the winter. However, market watchers who follow fundamental signals such as storage and weather disagree and maintain that current price levels are only realistic if the market experiences another bitterly cold winter. “This remains a weather-driven market. We had 3,200 Bcf in storage last November and it didn’t make a difference,” said Ed Kennedy of Commercial Brokerage Corp. in Miami, referring to the frigid winter that depleted storage down to the record lows this April.

Heading into the report, natural gas held firm Wednesday. Traders were quick to point to concerns over a developing storm in the central Bahamas as a reason not to be too short. When traders arrived back into the offices Thursday morning to learn that the system had done little more than dump drenching rains on south Florida, there was a release of the pent-up selling that added to the downward pressure Thursday. However, once back over the open waters in the Gulf of Mexico the storm regenerated Thursday afternoon and by 5 p.m. EDT had achieved the winds and the closed low-level circulation necessary for it to be classified as a tropical storm.

Located about 350 miles southeast of the mouth of the Mississippi River Thursday evening, Tropical Storm Erika was moving toward the west at a healthy clip of near 21 Mph, according to the National Hurricane Center. On its current path she is expected to reach the coastline at the Texas-Mexico border at roughly 2 p.m. Saturday. Though some strengthening is expected, Erika — packing maximum sustained winds of just 40 Mph — does not appear to be a threat to natural gas production assets in the north-central gulf.

Thursday morning’s sell-off has not invalidated the bullish technical outlook, according to Craig Coberly of GSC Energy in Atlanta. “[The move lower] is actually quite consistent with the bull trend. We needed and were looking for a correction.” For Coberly, the decline could probe as low as $4.58 without changing the outlook. In daily stochastics, the market is not yet oversold on the 68-minute chart. “My inclination here would not be to get long quite yet,” he said, sensing the market could probe lower still.

Kennedy disagrees and feels the market might use Thursday’s $4.79 low as a springboard to higher levels Friday. “We saw a good bit of strip buying from the end-user community when prices dipped into the $4.80s. That coupled with some short-covering on account of the storm in the Gulf of Mexico should be enough to boost prices ahead of the weekend,” he speculated.

Overnight Access trading came to an abrupt end at roughly 4:20 p.m. EDT Thursday afternoon when the power went out across much of the Northeast (see related story). At that time the September contract was trading at $4.933, up 4.2 cents from Thursday regular-session settle. As of press time last night it was unclear when Nymex would reopen.

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