As has often been the case on Thursdays this summer, natural gas futures prices tumbled lower on the news that the market had injected another hefty volume of gas (83 Bcf) into underground storage facilities. The August contract was hardest hit by the sell-off as it fell to a new seven-month prompt contract low at $4.66. A small rebound was seen near the close, leaving the contract to finish the session at $4.731, down 14.5 cents for the day and nearly two dollars off its high from early last month.

According to the Energy Information Administration, there was 1,949 Bcf of working gas in storage as of July 18, up 83 Bcf from the week prior. Though still 537 Bcf less than at the same time last year and 286 Bcf below the five-year average, the amount of gas in storage has improved significantly over the past 14 weeks. Accordingly, most market watchers now believe that storage will easily reach the 3,000 Bcf target by Nov. 1, a feat not thought remotely possible when storage dropped to its 623 Bcf low in April.

“Anything in the 80s was bearish,” said George Leide who was looking for an 85 Bcf figure. “We almost tied the record for the largest storage injection historically for this week. The psychology of this market has changed over the last four weeks. Storage is on its way to 3,000 Bcf. Funds are short. Greenspan has paved the way for Congress to allow access to federal lands to oil and gas exploration,” he continued.

Versus consensus expectations centered on a 80-85 Bcf refill, the 83 Bcf was neutral. However, when compared to last year’s 64 Bcf injection and the five-year average of 68 Bcf, the report was deemed bearish. Not only did the market succeed in filling storage at a better-than-average clip last week, but it did so during a period that saw Gulf of Mexico production offline and high electricity demand.

According to the Edison Electric Institute, there were 85,969 gigawatt-hours of electric generation in the continental United States last week — the sixth highest weekly tally on record. On the supply side, an estimated total of 8 Bcf was taken off the market last week as a result of Hurricane Claudette.

Combined, those two factors make the 83 Bcf storage figure even more bearish. Accordingly, early indications suggest the storage report for this week (to be released next Thursday), will feature an even larger storage injection. That figure, when contrasted with the year-ago injection of 48 Bcf, will add more heft to bears’ coats.

Looking even further ahead in the storage crystal ball, Ronald Barone of UBS Warburg in New York believes injections this year will continue to outpace historical figures. “We expect the deficit to descend into the 300-360 Bcf range by mid-August, given the latest lackluster temperature outlook, some level of ongoing demand elasticity, and the following three small injection comparisons of 33, 53 and 37 Bcf,” he wrote in a note to customers Thursday.

Though the intermediate- to longer-term trend is still down, Leide would not rule out a short covering rally to alleviate oversold conditions in the short run. Accordingly, he is advising his clients to either cover a portion of their shorts or establish new longs as prices drift down to the $4.67-69 area. A sell-stop should be positioned down at the $4.64-65 area to limit losses should the market fail to rally, Leide said.

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