Coming in slightly below historical comparisons but above most industry estimates, the Energy Information Administration (EIA) reported Thursday morning that 94 Bcf was injected into underground storage for the week ended July 8.

As a result, August natural gas futures immediately dropped 13 cents from its pre-report trading level to trade at $7.80. However, following the initial knee-jerk reaction, the prompt month began to creep higher again, reaching a high of $8.01 as of 11:09 a.m. EDT. August natural gas slumped once again in the early afternoon to reach a low of $7.66 before running up to settle at $7.844, down 5.6 cents from Wednesday.

“The 94 Bcf in net injections to DOE natural gas storage for last week was more than the market had bargained for and it will force traders to reassess their bullish view,” said Tim Evans of IFR Energy Services. “However, what doesn’t kill the recent rally could make the market stronger, as we see plenty of reason to expect stronger data next time around, with Hurricane Dennis having cut output by 23 Bcf and both Emily and a nationwide heat wave threatening trouble for next week.”

The 94 Bcf injection for the week was slightly lower than the five-year average build of 98 Bcf and significantly lower than last year’s 108 Bcf injection. The ICAP-Nymex storage options auction on Wednesday revealed a consensus forecast of a 85.4 Bcf injection.

“I think we have a market where people are afraid to trade due to the current volatility and how high the price is,” said Tom Saal of Commercial Brokerage Corp. in Miami. “The risk is almost as much as the reward. What that means is the local traders on the floor can move the price up and down. That doesn’t mean they are making money, it just means they can move the market around due to the lack of volume.”

Despite the fact that the storage number was bullish when compared to historical comparisons, Saal said the real measure of the report is what traders and analysts are expecting. “The 94 Bcf storage number came out and was deemed bearish due to expectations, so traders sold it off,” he said. “Then they went to cover and there was nobody there so they ran it up. Apparently a lot of sellers then showed up at $8 and ran it down. Once it broke the $7.80 area, the funds came in and started selling, so there was really a little contribution from everyone on Thursday.”

As to where the futures market is headed going into the weekend, Saal said he wasn’t sure. “I kind of missed this big blow-up in price,” he said. “I didn’t see it coming. My data still says you have to sell this thing, but with that storm still brewing down there I don’t expect a sell-off [Friday]. We will probably hang in this area, but we could even go higher tomorrow… I don’t know.”

Hurricane Emily continues to rattle traders. “Being energy traders we’re feeling like a target in a shooting gallery,” said Phil Flynn, a broker with Alaron in Chicago. “If tropical storms are going to take one shot after another, the law of averages would suggest that eventually one of these storms will do major damage. Perhaps it could be the type of damage that could send a ripple effect across the entire world economy. Trading energy stocks and energy futures will be like trying to ride a bucking bronco!”

The National Hurricane Center reported at 5 p.m. AST on Thursday that Emily had reached Category Three hurricane status and was located 445 southeast of Santo Domingo in the Dominican Republic. It was moving west-northwest at 21 mph with maximum sustained winds of 115 mph.

Landfall of Emily is more uncertain than that of Dennis. “If high pressure to the north remains strong, Emily will track toward the west and wind up in Mexico,” said AccuWeather. Other forecasts show Emily taking a more northwesterly course, touching the Yucatan Peninsula and heading into the Gulf of Mexico.

Working gas in storage now stands at 2,280 Bcf, according to EIA estimates. Stocks are now 140 Bcf higher than last year at this time and 238 Bcf above the five-year average of 2,042 Bcf.

The East region injected 64 Bcf into underground storage, while the Producing and West regions chipped in 19 Bcf and 11 Bcf, respectively.

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