Unable to live up to revised storage expectations, the natural gas futures market plummeted lower Wednesday afternoon as traders continued to liquidate new longs. For the third time in three days the September contract tested, but failed to break through resistance in the $3.35-40 area, paving the way for intra- and inter-day profit-taking. The September contract bore the brunt of the selling pressure, spiraling 21.5 cents lower to close at $3.081.

According to the American Gas Association, 77 Bcf was added to underground storage facilities during the week ending July 27, bringing working gas levels to 67% full at 2,203 Bcf. Last year at this time 63 Bcf was added to supplies and the five-year average injection is 59 Bcf. Storage now stands 283 Bcf above year-ago levels and 182 Bcf above the five-year average.

While expectations Monday and Tuesday had been centered on a 75-90 Bcf injection, those predictions were ratcheted downward throughout the morning Wednesday. There was a growing consensus that the market was going to see a sub-70 Bcf number, a Houston-based trader said.

A case in point was broker Jay Levine of Advest Inc., who first called for a 79 Bcf injection, but later revised his estimate down to 65 Bcf. “If we have a 70 Bcf or above, I believe you will see a sell-off. But anything in the low 60s and you can expect futures to rise 20 cents,” he said just prior to the release of the report Wednesday. As it turns out, his first scenario was played out, with prices tumbling 27 cents during the last 70 minutes of trading.

Looking ahead, Levine is cautious of a bounce to the upside in the near term, while remaining bearish in the intermediate to long-term. “The downtrend channel held at the upper range in the $3.40s area earlier in the week, and I would use that as my pivot point. I also think there will be some support here at the 307-310 area followed by 297-300,” he said.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.