After probing perilously close to a technical cliff at the $4.55 level Tuesday, the natural gas futures market worked its way quietly higher Wednesday as traders appeared reluctant to be short heading into another potentially bullish storage report Thursday. By virtue its higher-high, higher-low, 5.5-cent gain and $4.694 close, the October contract was able to post a positive day on the charts, potentially paving the way for more upward consolidation following the 10:30 a.m. ET inventory release.

Last Thursday, the Energy Information Administration said that 53 Bcf was added to underground storage facilities during the week ending Aug. 22, boosting working gas levels to 2,319 Bcf. Versus nearly all measuring sticks, the injection was bullish as it fell short of the 65-78 Bcf common range of expectations, the year-ago tally of 59 Bcf, the five-year average build of 58 Bcf, and the 78 Bcf addition from the week prior.

There are two schools of thought on the next injection that have made for some wide-ranging predictions. There are those that call for another refill of less than 60 Bcf, citing the idea that storage injections have fallen off their torrid summertime pace. On the other side, there are those that subscribe to the averaging approach to weekly storage injection figures. For them, it is likely that last week’s relatively small 53 Bcf injection report will be followed by a larger 80 Bcf or greater figure this week.

If the averaging approach plays out Thursday, it will not be the first time this summer. The industry was rocked in early July by a similar scenario. Breaking the string of triple-digit weekly storage refills at four, the EIA announced a smaller-than-expected 97 Bcf injection on Thursday July 3. Gas prices, which were already in the process of a cautious short-covering rally, used the smaller-than-expected refill as a springboard to higher levels in pre-Independence Day trading (see Daily GPI, July 7).

A week later, bears got their turn. In a textbook display of just how large an impact the gas storage report can have on the market, natural gas prices plummeted on Thursday, July 10 just moments after the EIA said that a hefty 111 Bcf was added to underground storage facilities. A marathon of selling was seen on that day, with the then prompt August contract falling 26.2 cents to finish the day at $5.258 (see Daily GPI, July 11).

The narrow band of expectations for this Thursday’s storage report call for a 70-75 Bcf injection. Last year at this time the industry built 65 Bcf into inventories and the five-year average analog stands at 59 Bcf.

In daily technicals, support stands at the aforementioned $4.55 level. Resistance is clustered at $4.70-73 and $4.84-86.

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