Dismissing a natural gas storage injection report that was right in line with industry estimates, expiring September natural gas futures pushed to a new low for the move at $2.692 before rebounding to go off the board at $2.843, down 6.7 cents from Wednesday’s finish. The October contract dropped 8.8 cents to close at $3.206.

Just prior to the Energy Information Administration’s (EIA) 10:30 a.m. EDT report revealing that 54 Bcf was injected into underground stores for the week ending Aug. 21, the prompt-month contract was trading at $2.814. In the minutes that immediately followed the release the contract dropped to $2.698. The contract reached the $2.692 low in afternoon trade before rebounding late to close.

The $2.500 to $2.750 price range is viewed as an important support zone by some market watchers, who note that technical charts highlight the area from as far back as 1992 (see Daily GPI, Aug. 26).

“The 54 Bcf in net injections was only slightly over the consensus for a 52-53 Bcf rise, thus neutral relative to expectations,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “The build was less than the 66 Bcf five-year average though, and so supportive in that sense. It may also represent a slight tightening relative to what the week-to-week change in cooling demand implied, but it was essentially inside the margin for error.”

Heading into the report, Evans had been calling for a 57 Bcf build while Bentek Energy was looking for a 55 Bcf addition.

In addition to being smaller than the five-year average build, the actual 54 Bcf addition was dwarfed by last year’s 100 Bcf injection for the similar week. However, there is some debate as to whether the injection reports from here on out will reflect the true supply-demand balance. With more than 3.2 Tcf already in the tank and some analysts calling for a record level of inventories by the end of the injection season, producers could be turned away due to cavern capacity levels.

This dynamic led Barclays Capital analysts on Tuesday to call the gas storage outlook for the next few months “a train wreck” (see Daily GPI, Aug. 27a). There is also some question as to what the true storage capacity within the United States is, with some media reports pegging the number as high as 3.9 Tcf, which, if true, would be much larger than current figures (see Daily GPI, Aug. 27b).

As of Aug. 21, working gas in storage stood at 3,258 Bcf, according to EIA estimates. Stocks are 516 Bcf higher than last year at this time and 500 Bcf above the five-year average of 2,758 Bcf. For the week the East region injected 43 Bcf while the West and Producing regions chipped in 6 Bcf and 5 Bcf, respectively.

One Washington, DC-based broker said the prospects of a “real” rally were dim. “At a minimum you could see this market get back up to $3.440, but that would only be a normal 33% retracement of the move from last May,” he said. “This goes to show that we have a lot of work that has to be done here and we really need to see some improvement in the underlying fundamentals in order for a move back up to have any kind of follow-through.”

He noted that the bulls are currently missing a powerful weapon from their arsenal. “What’s interesting about this is the fundamental that normally supports prices during August and September is absent…and might be on a permanent vacation,” he told NGI. “We can normally rely on hurricane activity to give prices a bump here, but we haven’t really had it yet this year. Even if some storms do show up in the Gulf of Mexico here in the near future, you have to wonder how much of an impact it will have on price because the country’s production center has been migrating from the Gulf to onshore into the shale plays. A hurricane up the gut of the Gulf just doesn’t carry the same implications for the industry as it did just a few short years ago.”

Commenting on the expiration, the broker said he wasn’t at all surprised that September went off the board without any real violent swings. “The market has changed and the last day has become a tame affair,” he said. “Where large moves used to be the norm on the last day of a contract, I honestly don’t remember the last time we saw fireworks. The move to electronic trading and quarter-sized contracts have moved a lot of guys away from entering last-day with futures contracts. These traders are doing an exchange for swap sometime during the month. If they are long on the market, they sell the big contract and buy four of the quarter-sized contracts that are available on Nymex ClearPort. The quarter-sized contracts settle on cash, so there is not a lot of risk. Things are really thin today in an expiring contract. People just aren’t taking the risk on the last trading day.”

To give an idea of the exodus in the front-month contract near expiration, the broker said September natural gas only had 29,000 contracts left as of the end of business on Tuesday. By comparison, the October contract had 182,000 contracts on the same day.

Economy watchers got a dose of good news Wednesday in the form of improved durable goods orders. The Commerce Department reported that July durable good orders increased 4.9%, well above market expectations of 3% and smartly ahead of June’s revised minus 1.3% reading.

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