Bullied by a smaller-than-expected storage injection figure, natural gas futures shot 20 cents higher in 40 minutes Wednesday as traders alleviated oversold conditions and pressed the market through several important technical levels. The August contract received the biggest boost, closing 30.6 cents higher at $3.276.

According to the American Gas Association, 84 Bcf was added to underground storage facilities last week, bringing working gas levels to 65% full at 2,126 Bcf. The injection was near the lower end of the 80-100 Bcf range of expectations but still well above last year’s 54 Bcf refill. The injection also ranks as the smallest weekly addition to storage since the middle of April and not since May has less than 100 Bcf been injected into the ground. Storage now stands 269 Bcf above last year’s level and 164 Bcf above the five-year average.

For Tom Saal of Miami-based Pioneer Futures, the effect of the bullish storage report was accentuated by hot temperatures across most of the country as well as short-covering on the first of the last-three-day-settlement period. “It was a double whammy. The report was below expectations and the market is reacting accordingly. We have some upward momentum, and summer has finally shown up. That is putting a crimp in the market’s ability to continue to see triple-digit injections. Add to that the fact that you have a good deal of short-covering ahead of Friday’s expiration and you have a 20-cent rally,” he said Wednesday afternoon.

Another trader was quick to note that the market was poised for a bullish reaction to storage. “You gapped higher on the open yesterday and early attempts to fill that proved futile. Although we made a $2.995 low for the session, you can make the case that we gapped through resistance at $3.00. Either way, the price action was very constructive.

Jay Levine of Advest Inc., on the other hand, is not buying it. “Although shorts got squeezed today, I continue to believe that this rally will be very short-lived (a bear market bounce) and would view further gains as a selling opportunity.” His proof lies in the steep trajectory of storage injections, which was not diminished by yesterday’s injection.

In daily technicals, August did some work Wednesday, not only by gapping higher on the open, but also by spending almost the entire session above resistance at $3.00-05. That level now stands as support once again. Also of bullish impact was the market’s ability to fill in the gap created by the lower open on Monday, July 16. With that level bested, bulls may try to fill in the gap up to the July 12 low of $3.36.

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