With traders playing it close to the vest for the second consecutive session, November natural gas futures on Wednesday followed up Tuesday’s 4.5-cent advance with a 3.4-cent decline to $4.841.

After trading in a 17.7-cent range between a morning low of $4.730 and an afternoon high of $4.907, the prompt-month contract returned to nearly unchanged. Some traders said the action on Tuesday and Wednesday has all the signs of a market regrouping before making its next move.

“We’ve had some pretty good price moves over the last few weeks, so I think what you are seeing now is traders stepping back and taking stock of the situation,” said Tom Saal, a broker with Hencorp Becstone Futures in Miami. “The interesting thing pricewise is that this week was the first time since Feb. 9 that the front-month contract settled above $4.600, which is an extremely important price level in the history of natural gas. During the first 10 years of natural gas futures trading it almost never traded above $4.600. After a couple of gyrations, it never traded below $4.600 until early this year. The fact that we finally settled back above that price level is significant if you are looking for the market to show some momentum to the upside.”

Saal said he was surprised that the spread between October and November futures did not come in more before October’s expiration. “I thought that spread would narrow, the market would regroup and then it would head higher once again. Having said that, it is leaving a big gap on the charts between $4.598 and $4.035. Eventually, we know that gap will be filled, but the timing is uncertain. It makes for a pretty big target.”

Looking at possible resistance levels, Saal said the Fibonacci retracement target is just two dimes away at $5.050

Tuesday’s release of Energy Information Administration (EIA) July natural gas production data may be interpreted as bullish as it revealed that falling production was the result of lower Wyoming output due to shut-in wells rather than diminished productive capacity resulting from a low rig count (see Daily GPI, Sept. 30). Lower 48 gross natural gas production fell 1.1% in July due largely to a drop in Wyoming production as wells were shut in.

Technical traders, using Elliott Wave analysis, see just one hurdle before the way is cleared for November futures to tack on as much as another 30 cents. “Our only point of contention before the $5.072-5.179 area was $4.993 as a potential [price movement] from the $2.409 low,” said Brian LaRose, an analyst with United Energy. He noted that Tuesday’s rally stopped at $4.975. “Did natgas run out of time or has natgas run out of steam? $5.072-5.179 would be the next hurdle to clear if the bulls can keep the momentum. Any pullback from here will be considered a bull market correction,” he said.

Looking in on the nation’s storage picture, the industry appears to be looking for an injection in the low 60s Bcf Thursday morning when the Energy Information Administration releases data for the week ending Sept. 25. The number revealed will also be compared to last year’s 82 Bcf build for the week and the five-year average injection of 68 Bcf.

A Reuters survey of 26 industry players produced an injection range of 56 Bcf to 67 Bcf with an average build expectation of 61 Bcf. Bentek Energy said it projects an injection of 62 Bcf, which would bring current stocks to a record high of 3,587 Bcf. The research firm sees a 37 Bcf injection in the East Region, a 17 Bcf build in the Producing Region and an 8 Bcf addition in the West Region.

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