Fighting off a slightly bearish storage report when compared to historical averages, the September natural gas futures contract resisted an early push lower to trade higher at midday Thursday. When it was all said and done, September futures — trading in its first day as the prompt month — gained 3.8 cents to close at $6.18.

The Energy Information Administration’s storage report for the week ended July 23 revealed a build of 70 Bcf. Even though the injection was expected by market watchers and compared bullishly to last year’s 81 Bcf build, it did manage to far outpace the 59 Bcf five-year average. As a result, the surplus over the five-year average increased from 57 Bcf last week to 69 Bcf.

Traders agreed that the market’s inability to break lower despite the undeniably bearish trio of mild temperatures, a dearth of tropical storm activity and plentiful gas in storage is good news for the bulls. The rationale here for bulls is that one or more of these factors eventually will turn in their favor. It will be at least another week, however, until bulls can point to storage data as a supportive price clue.

“There is certainly no shortage of bearish news,” said Tom Saal of Commercial Brokerage in Miami. “The market [had] been trending lower for a couple weeks leading up to Wednesday’s expiration. We were looking for a short covering rally and we got it,” he said, noting that the rally may have been the break bulls needed.

Specifically, Saal believes the market is likely to trend sideways here until there is fresh market news. And because of the preponderance of price negative news out in the market right now, any news is more likely to be bullish, he said.

In daily technicals, the September contract rose to a key level. Failure to test Wednesday’s $6.22 high or last Thursday’s $6.245 top would put the market back on the defensive. Psychological support stands at the $6.00 mark followed by Wednesday’s early low at $5.925.

Crude relaxed a little Thursday as Russia lifted its threat to block oil sales by the country’s largest oil firm Yukos. The threat Wednesday helped oil futures notch a new all-time high, in addition to propping up natural gas futures (see Daily GPI, July 29). Crude futures on Thursday dropped 15 cents to settle at $42.75.

Calling the natural gas storage number right on the button, the derivatives auction, which is based on the EIA’s weekly natural gas storage report, set the trading level at 70 Bcf on Wednesday, slightly lower than the pre-auction indicative prices level of 72.4038 Bcf.

According to the EIA, working gas in storage now stands at 2,297 Bcf, 235 Bcf higher than last year at this time. The East region led the injections with 55 Bcf, while the Producing and West regions chipped in 13 Bcf and 2 Bcf, respectively.

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