In what may turn out to be the most bullish 2-cent decline in recent memory, natural gas futures clawed their way back from early losses to finish near a high for the session. At $4.642, the October contract ended 1.9 cents lower on the day, but an impressive 9.2 cents above the $4.55 low notched early in the session. At 88,496, estimated volume was heavy and added credence to the rebound.

After gapping lower at the opening bell, the prompt contract could not attract the buying push necessary to break below support at the $4.55 level. Bargain buyers were quick to step in and local traders were forced to cover shorts. A last minute buying surge filled in the $4.64-65 chart gap near the closing bell Wednesday, potentially paving the way for more strength Thursday.

Although many market watchers and traders admit the fundamental situation remains decidedly negative, they note that the technical outlook improved following Wednesday’s spirited rally of the $4.55 level. “We have yet to settle below $4.60,” said Tom Saal of Commercial Brokerage Corp. in Miami. “Support at $4.55 held and along with the $4.55 low we saw earlier this month, we now have a ‘W’ bottom formation on the daily chart, which is a pretty bullish sign.”

For weeks market watchers have been quick to note that prices traditionally move higher late in the summer as hedgers procure their supply for the upcoming winter. That buying push could be especially strong this year with weather-sensitive gas users endeavoring to err on the side of caution following last year’s frigid temperatures. “That fear won’t go away until we get into winter and [actually] find out what sort of weather it brings,” Saal continued.

After having correctly called for lower prices since early spring, Saal is now shedding his bear coat in time for winter. “Who is going to sell the market right now?” he asks. “Fund [traders] are shorter than they have almost ever been. Producers aren’t going to sell it now. The only real sellers out there are the weak length, and how much damage can they do?” Add to that the commercial buying you have now that September cash prices are 30 cents below first-of-month levels and you have a bevy of bullish factors, he said.

However, if the bears are going to make a push to break below critical support at $4.55, a good time to do that would be following the release of potentially price-negative storage data Thursday morning. Early expectations are centered on an 85-96 Bcf refill, which would compare to a 69 Bcf build last year, a 76 Bcf five-year average injection, and the 97 Bcf addition reported by EIA last week. With eight weeks left in the injection cycle, the industry needs to inject only 64 Bcf/week to reach 3,000 Bcf by Nov. 1.

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