After dipping to a new low for the move at $3.049 repeatedly in overnight Globex trade, September natural gas futures rebounded a bit during Wednesday’s regular session. Falling just short of sub-$3 prices for the first time since the same week of 2002, the prompt-month contract ended up closing the day’s session at $3.119, up 2.3 cents from Tuesday’s close.

“If this market sees a $2 handle, in theory it should find some support, but all bets are off,” said an East Coast broker. “These funds are really running the show right now. I think it is going to be a footrace between the funds and the commercials. I think it depends on how long the commercials can hold on. I think we’ll likely get a two in front of this price, but it will only be short-lived.”

Hencorp Becstone Futures LC broker Tom Saal said the natural gas market has certainly been “interesting” as of late. “Based off of Market Profile and other projections, we should dip below $3 here,” he told NGI. “However, I wouldn’t be surprised if we don’t. They’ve been pushing this price down pretty hard for a long while, but the bearish fundamentals have been around for a number of months, so there really is nothing new out there.”

Saal disagreed that the funds were currently calling the shots, noting that they likely were laying low ahead of new regulation rulings coming down from the Commodity Futures Trading Commission. “It looks like this most recent push down has been on some long liquidation. I think people who had put long hedges on might have decided that these low prices are going to stick around for a while, so they are selling their long positions out,” he said. “I don’t know whether the funds were in on this drop. I would be a little surprised if the funds decided to sell some more in light of what is going on in Washington with the regulation changes. I don’t know if the new rules are going to end their strategy, but it certainly is going to modify it.”

While East Coast residents braced for Hurricane Bill, a Category Four hurricane that is continuing to strengthen, some in the oil and natural gas industry continued to keep an eye on the remnants of Tropical Storm Ana.

While the storm could not hold it together over the weekend as it crossed some of the larger Caribbean Islands, the remnants of Ana, now just a tropical wave, are emerging into the eastern Gulf of Mexico, which could once again build up the storm’s strength, according to Katie Storbeck, a meteorologist with AccuWeather.com. “As the system moves over the warm waters of the Gulf, Ana could reorganize into a depression or a weak tropical storm [Wednesday night] or Thursday,” she said.

The East Coast trader said he was still unconcerned. “It doesn’t seem like anyone cares that much about Ana,” he said. “It is not on the radar of most the people I talk with.”

Turning attention to Thursday morning’s natural gas storage report for the week ending Aug. 14, most industry projections are for a build of 50 to 55 Bcf. Saal said he is counting on a 51 Bcf build while Bentek Energy said its flow model indicates an injection of 53 Bcf, which would bring stocks 9.3% above the five-year high and 19.1% above the five-year average.

An injection in the low 50s Bcf would come in just below the five-year average of 56 Bcf, but well short of last year’s 82 Bcf addition.

Bentek noted that its estimated injection is below the five-year average for only the third time since March. “This season’s injections have averaged more than 13 Bcf per week above the five-year average,” the research firm said in its weekly storage note. “Assuming injections for the rest of the season track along the level of the five-year average, stocks at the end of the season will reach 3.9 Tcf.”

Even though the fundamental relationship between crude and natural gas is tenuous at best, the surge in crude futures values on Wednesday could lend some psychological support to natural gas in the near term. After U.S. inventory reports on Wednesday showed a significant decline in crude inventories and imports, the September crude contract surged $3.23 to close out the regular session at $72.42/bbl.

“Fundamentally, the gas market is fighting an uphill battle. Storage is at a record, demand is soft and production, though flattening because of a plummeting rig count, is more than adequate,” said Mike DeVooght of DEVO Capital, a trading and risk management firm in Colorado. In his view, strength in other commodity markets should have helped lift natural gas prices, but “the fact that the gas market has not been able to rally hardly at all during the recent complex and commodity rally does not bode well for future natural gas prices. When the strong get weak, the weak usually get weaker. If commodities in general start to retreat, the gas market could have a problem.”

For the moment weather in key energy markets is favoring the bulls. The National Weather Service forecasts for the week ending Aug. 22 a greater-than-normal accumulation of cooling degree days (CDD). New England is expected to see 76 CDDs, 46 more than normal, and New York, New Jersey and Pennsylvania are forecast to bake under 78 CDDs, or 34 more than their normal tally. The Midwest from Ohio to Wisconsin is expected to see 60 CDDs, or 18 more than normal.

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