November natural gas futures reached a peak of $6.985 on Friday before trickling to a low of $6.860 and settling at $6.870, down 4.9 cents from Thursday’s close. The week’s finish was 12 cents lower than the contract’s previous week’s close of $6.990.

The activity in the crude futures market continued to overshadow natural gas as November crude dropped $1.22 Friday to close at $81.66/bbl. The drop was even more surprising because 24 hours earlier the same contract spiked $2.58 to a close of $82.88/bbl.

“Natural gas futures didn’t do a whole lot for a second session while crude futures continued to bounce all over the place,” said a Washington, DC-based broker. “November natural gas was a little bit strong early on Friday, bounced around and then closed 4 cents down, which is nothing in this market. We are still holding to a mildly bullish position here. While we are still subject to a little bit of a push-back here to the lows of the first week of September, I don’t think we will make any new lows. We are in a corrective phase before we put in a more sustained rally.”

Looking at the storm picture, the broker noted that while there is certainly no lack of activity, a blocking wind shear is still on the scene keeping Tropical Storm Karen buffeted out there. “That formation has to get out of the way before anything can get close to us,” he said. “However, the market sentiment has changed. A month or two ago, the market would be selling off hard on news of a wind blocking formation. Now, this market is sort of ho-hum.

“I can’t foresee what the next big thing for the down move could be. If people are waiting for the hurricane season to end uneventfully before pushing lower, that is not going to work because the next thing on the radar is the winter, so there really is no letdown. If the funds are using a trend-following system and are still short, then they will stay short until they get a reversal signal.”

Looking at support and resistance lines, the broker said he is eyeing a punch through $6.700 to $6.650 on the downside and $7.350 to $7.400 on the upside.

On Thursday the Energy Information Administration reported a storage injection of 74 Bcf for the week ended Sept. 21, a number widely anticipated and which drew little market notice. The next report might not be so benign. Cooling degree day (CDD) forecasts for major energy markets show a much larger than normal level of demand for the week ended Sept. 29 and that should be reflected in the upcoming inventory statistics. For the week ended Sept. 29 the National Weather Service predicted an accumulation of 28 CDD, or 27 more than normal for New England and 30 CDD, or 24 more than normal for New York, New Jersey and Pennsylvania.

For the week ended Sept. 22, CDD data that impacted Thursday’s 74 Bcf reported injection showed just three CDD, or a normal tally for New England and nine CDD, or one less than normal for the Mid-Atlantic states.

The Atlantic basin is active, but forecaster MDA EarthSat places the threat to Gulf of Mexico infrastructure at less than 5%. The “bottom line,” according to meteorologist Matt Rogers, is that Lorenzo “has already made landfall in northeast Mexico, and Karen may start bending to the west [this] week, if it survives the next few days.” The forecaster places the probability of Karen weakening to a tropical depression at 60% and making it to a full-fledged hurricane at 25%.

Top traders agree with the EarthSat assessment. “Although several wave systems are still being monitored in the Gulf Coast region and in the Atlantic, neither the intensity or path of these storms would suggest a threat to Gulf Coast oil infrastructure. By and large, some additional downside follow-through appears possible; however, we are now viewing the $6.30 area basis November futures as a new price floor in view of Wednesday’s surprisingly strong expiry of the October contract,” said Jim Ritterbusch of Ritterbusch and Associates. On Wednesday, October futures rose 6.3 cents to expire at $6.423/MMBtu.

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