Like a stunned boxer that twice tries but fails to lift himself off the mat, the natural gas futures market was unable to recover Thursday following the release of storage data from the Energy Information Administration (EIA) showing a larger-than-expected 64 Bcf injection. After dropping a cool 10 cents in 10 minutes following the report, the August contract looked like it might rebound before lunchtime. However, that rally and a similar one in the early afternoon fizzled, leaving prices to sift downward and close just off their lows. At $2.902, the August contract finished with a 14-cent decline for the session.

According to the EIA, there was 2,486 Bcf of working gas in storage last Friday, an increase of 64 Bcf. Stocks were 334 Bcf higher than at the same time last year and 364 Bcf above the five-year average of 2,122 Bcf. In the East Region, stocks were 124 Bcf above the five-year average, following net injections of 49 Bcf. Stocks in the Producing Region were 189 Bcf above the five-year average of 610 Bcf after a net injection of 11 Bcf. Stocks in the West Region were 52 Bcf above the five-year average following a net addition of 4 Bcf. At 2,486 Bcf, total working gas is above the five-year historical range.

Although the 64 Bcf injection was bullish versus a 77 Bcf injection a year ago, it was bearish when compared to expectations that were centered on a 55-65 Bcf refill. The injection was in line with the five-year average increase for the week of 66 Bcf.

After betting on the market’s seasonal tendency to move higher, Tim Evans of IFR Pegasus in New York is now predicting the market will turn lower in sympathy with the larger downward trend. “The natural gas market may have given the upside its best shot, but it is becoming clearer that this may be one of those times when minor bullish developments and seasonal supports aren’t enough to sustain even a tradable upward correction,” he wrote in a note to customers Thursday. “Prices dropped to as low as $1.76 in late September last year, and stocks will be even higher this time around,” he added, in reference to the current year-on-year overhang of 334 Bcf.

However, not everyone has given up on higher prices. “If the market is able to bounce off of this [$2.875] low and make a little comeback here, I’m not going to get in its way,” said Tom Saal of Pioneer Futures in Miami. “We crossed over and settled above the middle Bollinger Band [Wednesday]. That could mean that we are now poised to test the upper band….Maybe not [Thursday], but eventually.”

Bollinger Bands are a technical chart tool used by traders to get in and out of a sideways trending market. The middle Bollinger Band is typically the 20-day moving average, while the upper and lower bands represent two standard deviations from that mean. A trader watching Bollinger Bands over the last couple of months might have bought near the June 13 low, sold near the June 25 high and bought again near the July 11 low. Currently, Saal sees the upper Bollinger Band in the $3.45 area.

In daily technicals, August has support at the recent lows at $2.875-885. More buying is likely as the market approaches last week’s lows in the upper $2.70s. On the upside, the market will need to get through some congestion in conjunction with failed trendline support in the $2.92-94 area. Higher still, the market should see selling in the $3.00-02 area.

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