Unimpressed by the paths of the first two significant storms of the season, natural gas futures on Tuesday lacked the ability to rebound from Monday’s 29.9-cent drop. The prompt month settled up three-tenths of a penny at $5.816 after trading within a $5.77-5.855 range on the day.

September natural gas futures even failed to gain traction after crude futures set a new all-time high on the day by cruising through the $44 barrier. September crude settled up 33 cents at $44.15, after reaching a record high of $44.24 in overnight trading.

“We are just marking time right now,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “There are a couple of systems out there and [traders] are waiting to get a little more of a clarification on their direction. Crude, of course, was up again, closing near its new record high.

“If I look at the market technically — even knowing the cool weather that is forecast to be coming in — this market is a buy between $5.80 and $5.50. It may head a little lower, but there is an awful lot of buying to be done,” he said. “Just look at what they did to the winter months Tuesday.” On the futures charts Tuesday, December 2004-March 2005 experienced hikes of 5.1 to 6.2 cents.

Summing up the current severe weather scenario, Tim Evans of IFR Energy Services said that although the hurricane season has finally kicked it up a notch, it won’t make any difference to the energy markets unless the storms threaten the producing regions in the Gulf of Mexico, which they have yet to do.

As the first named storm of the year. Hurricane Alex was upgraded to a category two hurricane Tuesday as it battered the Outer Banks islands of North Carolina. As of 5 p.m. (EDT) Tuesday, the National Hurricane Center (NHC) said Alex was headed back out over water on a northeastern path with winds around 100 mph.

“The National Hurricane Center has found a new tropical depression to occupy itself with, a system now a few hundred miles east of the Windward Islands that could become Tropical Storm Bonnie in the next day or two and a hurricane later in its life,” Evans said. “However, the way it looks right now, the storm’s track will take it past Puerto Rico and the Bahamas, curling toward Bermuda.”

The NHC said in its 5 p.m. (EDT) update that the storm, currently known as Tropical Depression Two, was headed for the Lesser Antilles, with squalls expected to begin overnight Tuesday.

With no production curtailment to speak of, Evans said the market is left to face a likely 80-90 Bcf injection in Thursday’s Energy Information Administration (EIA) storage report. He noted that an injection within that range would far outpace the 53 Bcf five-year average and extend the longer-term bearish storage trend. Kyle Cooper of Citigroup is calling for a build between 78 and 88 Bcf.

Cooper noted that the largest build for a week near the end of July was 77 Bcf in 1996. “It is considered very possible, obviously, that this week will establish a new weekly maximum injection,” he said. “Quite frankly, maximum weekly injections do not normally occur in a tight supply/demand market.”

In addition to the 53 Bcf five-year average, Thursday morning’s report will also be compared to last year’s 76 Bcf injection for the same week. If predictions of a sizeable build prove true, this year’s 69 Bcf surplus over the five-year average will only get bigger.

“September natural gas has sagged to a new $5.77 low, which happens to match the spot low from July,” Evans said. “While the market could hold here and mount a move higher off that support, the lack of a bounce here suggests prices are in no rush to challenge the failed support at $5.925, the $6.00 psychological barrier or the $6.045-6.09 price gap. Instead, we think it only requires a minor push to fall to the projected support at $5.70, with failure to hold there leading to a test of the $5.52 weekly uptrend support.”

Evans said a drop past that point would put the prior lows of $5.29 and $5.06 into the market’s sights. “Natural gas is capable of surprises, but it looks to us as if it is still vulnerable to a further decline.”

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