After spiking 7% higher Monday on storm hype, natural gasfutures retraced lower yesterday as traders hedged against thepossibility that the storm will miss the Gulf of Mexico entirely.Before tumbling lower, however, the prompt month was able to carveout a fresh all-time prompt month high at $4.85. The Septembercontract finished on the defensive, down 22.7 cents for the sessionat $4.52.

With the forecasted path of Hurricane Debby still very much indoubt, traders found it difficult to rationalize gas prices thatwere approaching the $5.00 level yesterday. “We saw good buying byfunds [Monday], and then selling by commercials and locals[Tuesday],” said a broker. “Things just got a little bit overdone.”

However, he is not surprised by the volatility. “We aren’t in a$2.00 market anymore. You can expect the moves in the $4.50 area tobe much larger,” he said.

Looking ahead, he feels that the market still has its fair shareof bullish fundamentals. “Debby is far from over and this move hasjust shown what the market is capable of. We have raised the bar,”he added. That said, he believes the market will ultimately retestSeptember’s $4.85 high, which looms some 30-plus cents aboveyesterday’s close.

The market will likely take a break from the monotony oftracking hurricanes today around 2 p.m. (EST) in order to focus onthe latest storage report from the American Gas Association.Expectations for that report are focused on a net injection withinthe 45 to 60 Bcf range, which neatly encompasses both last year’s50 Bcf refill and last week’s 52 Bcf addition. However, thefive-year average injection for this time of year of 63 Bcf is morestout, and a build of less than that in today’s report will serveto widen the 187 Bcf deficit.

Check back with earlythis afternoon for breaking storage and futures updates.

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