Despite an impressive opening trade, natural gas futures dropped lower Thursday morning in knee-jerk reaction to data showing a healthy 60 Bcf was injected into underground storage facilities last week. At 11:10 a.m. EDT, the September contract was 3.9 cents lower at $2.915, but as it turns out, that was only the beginning. With many traders taking an extended lunch break following an especially trying bidweek, a lone speculative fund trader was able to push prices lower in a second wave of selling. The September contract finished at $2.842, down 11.2 cents for the session.

According to the Energy Information Administration, working gas in storage increased 60 Bcf to 2,546 Bcf as of Friday, July 26. Stocks were 326 Bcf higher than the same time last year and 368 Bcf above the five-year average of 2,178 Bcf. In the East Region, stocks were 127 Bcf above the five-year average following net injections of 47 Bcf. Stocks in the Producing Region were 185 Bcf above the five-year average of 617 Bcf after a net injection of 3 Bcf. Stocks in the West Region were 57 Bcf above the five-year average after a net addition of 10 Bcf.

Last week the EIA announced a 64 Bcf addition and last year the EIA estimated a 68 Bcf refill. Weekly injections thus far this season have ranged from 15 Bcf to 105 Bcf, averaging 66 Bcf. Looking ahead, many traders are already focused on next Thursday’s storage report, which will cover this week’s extreme temperatures experienced in the eastern United States. Although it is still early, expectations are beginning to set up in the 40-50 Bcf range, which if realized would fall well short of last year’s comparable 75 Bcf addition.

And while the market may be boosted by the potential for a bullish storage report next week, there is plenty of time for prices to move lower first. That being said, traders will likely take their next price clue from updated weather forecasts Friday morning. As of Thursday, the National Weather Service was still calling for above normal temperatures across most of the country next week. Cash prices remained strong Thursday, with NGI’s Henry Hub averaging $3.07, about 23 cents above the September futures settle.

Also of impact Friday will be technical factors, which have defined the market’s trading range for the last month. Should bears muster enough selling pressure, support at $2.80 would be the first major obstacle to the downside. However, a failure to pierce through that level would undoubtedly usher in a wave of pre-weekend short-covering. How much higher might that short-covering take this market? On the morning of July 24 the market tested support at $2.80 only to turn around and rally 24 cents to close at $3.04 that afternoon.

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