A slightly supportive 90 Bcf natural gas injection report combined with a significant rally in crude futures brought the week’s natural gas futures decline streak to an end at three days on Thursday as the August contract gained 29.4 cents to close at $12.300.

The 90 Bcf addition to supplies for the week ended July 4 was slightly less than industry estimates, yet prices did not respond immediately following the Energy Information Administration’s (EIA) 10:35 a.m. EDT release.

“There was not a whole lot going on Thursday in natural gas news wise, so I think we definitely followed crude’s lead a bit,” said a Washington, DC-based broker. August crude reversed much of the damage done on Monday and Tuesday with a $5.60 rally Thursday to close at $141.61/bbl.

“We’ve been whipsawed around here a lot over the last few sessions in the energy futures contracts, but there is a key difference between crude and natural gas,” he added. “While both commodities dropped significantly in value, natural gas really has broken its uptrend line while crude failed to do so. In crude, the test was at $135/bbl. We sniffed it, but we didn’t break it.”

Outlining the normal behavior surrounding the break of an uptrend line, the broker noted that you break through and then have a little bit of a rally. “The rally is part short-covering — where people take their profit — and part the last of the dip buyers…who are the dips. We’ll likely rally a bit before failing, which will bring in another big wave of selling. I would expect one more big thrust down. Going off of the Fibonacci measurements from when this last bull leg started back in late December 2007-early January 2008. A 38.5 Fibonacci pullback from there takes us down to $11.080, which I think is a real possibility. However, we’ll likely get back into the high $12s before the failure.”

Heading into the storage report, a Reuters survey of 20 industry players produced expectations of a build of 90-106 Bcf with the average estimate of a 95 Bcf injection. The number was well below last year’s 98 Bcf injection and the five-year average build of 103 Bcf.

Longer term, analysts said the 90 Bcf build fell right in line with their projections. “It was right on what we thought. We nailed it right on the head,” said a Texas analyst. The 90 Bcf injection is well ahead of the 71 Bcf needed weekly to bring supplies to a comfortable 3.4 Tcf by the Nov. 1 start of the traditional heating season, but to get to that figure all kinds of assumptions regarding weather and tropical storm-related disruptions are necessary.

“If you don’t have weather, you do get quite a bit of gas in storage,” he said. He added that if current mild weather conditions continued, then a bin-busting 3.5-3.6 Tcf was likely. At present it looks like that will be the case, he said, but he also offered the caveat that things can change quickly.

Factoring in what he called “some weather” and “some hurricanes” that would drop supplies at the end of the season to the 3.2 Tcf area. “What you have is a band from 3.2 Tcf to 3.5 Tcf, and to me that is neutral to bullish.”

Weather-wise, he suggested that weather conditions couldn’t get much more mild. “To me the extreme [unsupportive weather conditions] is more of the same.”

As of July 4, working gas in storage stood at 2,208 Bcf, according to EIA estimates. Stocks are 389 Bcf less than last year at this time and 70 Bcf below the five-year average of 2,278 Bcf.

Traders on Thursday were still talking about the loss of $1.57 over the first three days of the week, which had some traders a little shell-shocked. A New York floor trader said the market had completely “blown through” all the support levels he had been tracking, and compounding the losses was the fact that there hadn’t been any commensurate weakness in crude oil. August crude oil rose one cent in Wednesday’s trading despite a supportive inventory report.

“This is a more expensive game than crude oil and [natural gas] traders are using closer stops. I think the buyers are waiting in the wings looking for something like $11.50,” he said.

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