The September natural gas futures contract turned in its second consecutive “do nothing” day on Wednesday, leaving some market watchers to wonder whether traders were saving their strength for a blitz of action on the contract’s expiration Thursday. The prompt-month contract ended up closing the regular session at $2.910, up 2.8 cents from Tuesday’s close.

The day’s action represented the contract’s second consecutive day of trading within a narrow dime range. After trading in a 9.8-cent band on Tuesday, the contract stayed within a 9.2-cent range on Wednesday between $2.823 and $2.915.

“Wednesday was a ‘do nothing’ day,” said a New York trader. “It almost feels like the calm before the storm, with the storm in this case falling on expiration. That said, I’m just not sure the fundamentals or technicals are there for a significant push in either direction.”

A Washington, DC-based broker told NGI he would be surprised if there were any significant moves on Thursday. “While natural gas futures have been pretty quiet over the last two days, that has been true of most of the markets recently. Summer is coming to an end and there is not a whole lot going on. With energy demand at a low ebb, it is hard to get excited about natural gas. Our gas business is way down. Hopefully it will come back to life as we move into the fall.

“The market appears to be consolidating at its current price level and it is possible that we are starting to see some bottoming action,” he added. “Our stochastics are starting to point higher and the oscillators are starting to bottom, so we could be starting to see a turnaround. When you look at it, there really is not much more room to go lower. It is really hard to justify going a lot lower considering the cost of extraction and all the other issues that are involved.”

Looking at the potential for a rally, the broker said he’s not so sure about that prospect either. “It is also difficult to justify a rally at the present time. It is now the end of August and we are entering the autumn shoulder season, so where is the demand going to come from? Any move higher would have to reach at least $3.440 before you could really begin to deem the move a rally.”

Traders see the market as development-starved but suggest that future price guidance might be seen in the back end of the price curve. “There is just no news on this market. No news, no weather and the numbers come in basically as expected. I think traders are looking to sell any kind of rally off a bullish EIA [Energy Information Administration storage inventory] number until we get some storms or weather,” said John Woods, senior trader at Integrity Energy. He cautioned that it was important to look at the back end of the board, which he described as pretty firm. “The front end of the board has dropped over $1 recently, but the March-April spread is all of 5 cents,” he said.

Top analysts see the market as having discounted significant bearish factors and caution that any surprises are likely to come from the bullish contingent. “With the temperature factor diminishing as a price driver, such a bullish surprise is expected to take the form of a major hurricane event,” said Jim Ritterbusch of Ritterbusch and Associates. He noted that the area near the Dominican Republic is under surveillance. “The path of this potential cyclone appears to be taking a northerly track similar to Hurricane Bill,” he said.

Storms notwithstanding, Ritterbusch cautions that new lows are still possible and said he “will evaluate this expectation in the light of [Thursday’s] storage data and expiration of the September futures contract.”

Taking a closer look at the storage report for the week ending Aug. 21, most industry estimates are looking for natural gas inventories to grow by 54 Bcf to 59 Bcf. Citi Futures Perspective analyst Tim Evans is calling for a 57 Bcf build while Bentek Energy is calling for a 55 Bcf addition.

The number revealed Thursday morning at 10:30 a.m. EDT by the EIA will be compared to last year’s 100 Bcf build and the five-year average injection of 67 Bcf. Whether or not Thursday’s report will reflect the true supply level is up for debate. With more than 3.2 Tcf already in the tank and some analysts calling for a record level of inventories by the end of the injection season, producers could be turned away due to cavern capacity levels. This dynamic led Barclays Capital analysts on Tuesday to call the gas storage outlook for the next few months “a train wreck” (see related story).

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.