Led by local buying, natural gas futures spiked higher for thesecond time in three days Wednesday as traders positionedthemselves on the long side of the market, ahead of the release offresh hurricane and storage news. However, after posting a $4.79high minutes after 2:00 p.m. (EST), the September contract waspressured lower throughout the last hour of trading as locals tookprofits on their long holdings. The prompt month finished up 8.5cents at $4.605, near the lower end of Wednesday’s trading range.

As it turned out, yesterday’s volatile price action was a fairreflection of the news that the market received throughout thecourse of the day.

Updated forecasts that gave Debby a 50% or better chance ofmaking it into the Gulf of Mexico were the first piece of newstraders were privy to yesterday, and they responded by establishinga $4.70 price at the opening bell. However, little in the way offollow-through buying was seen to promote prices past Tuesday’sall-time prompt month high of $4.85, and that left traders contentto wait for fresh storage news.

According to the American Gas Association, 55 Bcf was injectedinto underground storage facilities during the week ending Aug. 18,bringing total working gas to 2,092 Bcf or 63% full. Storage nowstands 360 Bcf less than last year’s level and 196 Bcf less thanthe five-year average. Market expectations circulating before thereport were centered on a 45-60 Bcf build.

“Locals are long and so if you get a neutral to bullish number,they have the incentive to push prices even higher,” said Tom Saalof Miami-based Pioneer Futures moments, before the report wasreleased. As it turns out, he was right, and no sooner had the AGAsaid that storage had increased by 55 Bcf, than the market spikedhigher as locals added to an already hefty accumulation of longpositions. But after reaching $4.79, the September contract waswhisked lower as traders learned that Hurricane Debby had beendowngraded to a tropical storm yesterday as it passed overHispaniola.

Looking ahead, traders will be focused on updated stormforecasts this morning. Although Debby appears to be on track forthe Gulf of Mexico, it might not have any punch left by the time itgets there.

As of last night Debby was moving toward the west at 18 mph andwas expected to pass over the high terrain of Eastern Cuba. Maximumsustained winds were near 50 mph, some 24 mph below hurricanestrength.

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