Gathering momentum as the trading session wore on Thursday, natural gas futures extended to new six-week highs as traders were forced to grapple with the bullish one-two combination of strength in the crude oil market and a lower-than-expected 53 Bcf storage injection for the week ending Aug. 9. The September and October contracts caught the biggest updraft from the buying, each gaining 21.7 cents to close at $3.127 and $3.172 respectively. At 139,856, volume for all the contracts in the gas pit was heavy and served to punctuate the price move.

According to the Energy Information Administration, there was 2,620 Bcf of working gas in storage last Friday, which was 279 Bcf higher than the same time last year and 333 Bcf above the five-year average of 2,287 Bcf. In the East Region, stocks were 105 Bcf above the five-year average following net injections of 45 Bcf. Stocks in the Producing Region were 166 Bcf above the five-year average of 628 Bcf after a net injection of 1 Bcf. And working gas levels in the West Region were 61 Bcf above the five-year average after a net addition of 7 Bcf.

Market observers had expected an injection somewhere between 44 Bcf and 75 Bcf. The common range of predictions had centered on a 55-60 Bcf build. The EIA’s historical estimates show a 46 Bcf injection at this time last year and the American Gas Association weighed in with a 50 Bcf refill a year ago. Last week the EIA shocked traders with a relatively low 33 Bcf injection as well as a 12 Bcf downward revision to its historical figures. Traders used last week’s bullish surprise to mount a five-day rally that culminated in a new two-week high at $3.04 Wednesday.

Looking ahead, traders believe next Thursday’s storage report could offer the market another bullish boost. Citing incremental storage withdrawals amid the record-setting heat experienced in the eastern United States this week, market watchers suggest that next week’s injection figure will have a hard time matching the 33 Bcf seen last week. However, not all are convinced. Thomas Driscoll of Lehman Brothers, whose 55 Bcf estimate for this week was just 2 Bcf off, sees another 55 Bcf injection next week. Last year’s comparable figure from the EIA was 85 Bcf.

However, storage was not the only bullish game in town Thursday. Also lending natural gas support was the price move in the nearby crude oil pit, which gushed to new three-month highs Thursday after OPEC’s president said the cartel is not certain to increase production at its next meeting. September crude finished 91 cents higher for the day at $29.06.

Another fundamental factor released yesterday that had bullish overtones was an updated 30-day temperature forecast. According to the National Weather Service, above-normal temperatures are expected across the entire western third of the country through the month of September. Normal temperatures are predicted across the rest of the country expect for south Florida, which also is forecast to see above normal mercury readings.

However, all of those fundamental factors may take a back-seat to technical considerations Friday. Since etching a $2.64 low just over a week ago, the September contract has sprung back to life and rallied nearly 50 cents while notching gains in five out of six trading sessions. For George Leide of Rafferty Technical Research in New York, this all adds up to the potential for a little bit of a profit-taking sell-off ahead of the weekend. Accordingly, Leide looks to be a seller between $3.09 and $3.18, attempting to catch the market on a retracement back down to the $2.85 area. “Support at $2.85 is key and because of the upward-sloping nature of the trendline, [support] moves up 3 cents each day. I look to buy this thing back on a move down to the $2.85-88 area,” he said.

However, like any good technician, Leide has a back-up plan. Should the market prove him wrong and continue higher, he looks to cover his shorts and initiate longs on a close by the September contract above $3.18. “If that scenario plays out, we could see $3.33 in a hurry.”

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