As it became more evident Wednesday that Hurricane Gustav left the energy infrastructure in the Gulf of Mexico intact (see related story), October natural gas futures continued to press the downside, coming within a couple of pennies of breaking below $7. The prompt-month contract recorded a low of $7.028 before rebounding to close out Wednesday’s regular session at $7.264, up less than a penny from Tuesday’s finish.

“We flirted with putting a six in front of this price but decided not to do it, at least on Wednesday,” said a Washington, DC-based broker. “We are still bearish…although just marginally so now. We had a nice short position on…then took it off and got a little bit long before getting stopped out on the weekend. It has backed up a little bit on us, but we will have to see.

“Despite the little blip up Wednesday, I’d still have to be on the bearish side of things. This did not look like the end of the move,” he added. “Given the way we sold off before and through the hurricane, I’d have to imagine there are still shorts to be pressed here. Using the Elliott Wave methodology, we are counting this as the fifth wave of five down, but it still has a chance to fall further and make a new low.”

Market technicians who follow patterns such as Elliott Wave and retracement analysis are wondering if the recent decline from $13.694 reached on July 2 is going to continue or if seasonal patterns will assert themselves. Natural gas prices have a history of increasing into November and staging a “preseason rally.”

“In wave count terms, how low can natgas fall and still look capable of a preseason rally?” queried Walter Zimmerman of United Energy in a recent report. Wave analysts often look for A, B, C corrections to major market moves, and the titanic advance that took spot natural gas prices to $15.780 in December of 2005 is looking like just such a case for an A (down), B (up), C (down) type of market adjustment.

“We peg $6.445-6.110 that must hold as a 0.618% A = C down from $15.780 with $13.694 (July 2008) up as B and 0.7862% of the $4.050 (September 2006) to $13.694 rally. Is there any case for support between here and there? All we can come up with at present is the $6.985-6.825 zone for a five-wave decline from the $13.694 high. And we have very low confidence in these [declines]. So we are looking lower,” he said in a Wednesday morning note to clients.

Turning attention to the natural gas storage situation, most estimators are not predicting another injection of the magnitude of last week’s 102 Bcf report. For the week ended Aug. 29, most market watchers are calling for a build in the high 80s Bcf to low 90s Bcf range.

A Reuters survey of 20 industry players produced estimates from 70 Bcf to 99 Bcf with an average expectation of an 88 Bcf build when the Energy Information Administration releases its report at 10:35 a.m. EDT Thursday. The number revealed will be compared to last year’s 38 Bcf injection for the week and the five-year average build of 59 Bcf.

Golden, CO-based Bentek Energy said its flow model is calling for a 91 Bcf injection to be revealed, which would bring stocks 5.3% below the five-year high and 3.8% above the five-year average. The research and analysis firm expects a 63 Bcf injection in the East region, a 22 Bcf addition in the Producing region and a 6 Bcf build in the West region.

Bentek said while it is unlikely, inventories at the end of the injection season could reach record levels. “Last year’s injections averaged 54 Bcf between now and the end of the injection season, and the five-year average is 61 Bcf for the same time period. If injections average 69 Bcf for the next 10 weeks, inventories will reach a new high.”

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