September natural gas futures managed to gain ground Thursday as a somewhat supportive inventory report brought buyers off the bench, and the resulting price response began to frame a positive technical picture.

The Energy Information Administration reported that natural gas inventories rose 28 Bcf, lower than a Reuters survey that showed an expected average build of 35 Bcf, but greater than industry consultant Bentek Energy, which was looking for a gain of 26 Bcf. At the close September futures rose 10.9 cents to $4.827 and October gained 10.5 cents to $4.848. September crude oil gained $1.37 to $78.36/bbl.

Analysts see market bulls beginning to stir. “The market has been perking up since [July] 15th and there is a little bit of an uptrend going,” said a Washington, DC-based broker. “Yesterday and the day before we broke through something of a downtrend line, so maybe the market is beginning to factor in all the hot weather we have been having. Clearly we have been getting some cooling demand.

“We are modestly bullish. Our MACD (moving average convergence divergence) system gave a buy signal on July 16, after the big day up. The limiting factor was the downtrend line and we have managed to get through that. We haven’t done it convincingly with a big explosion to the upside even with the [storage] number. That was a good number to drive prices higher. The fact that we didn’t drive all that much higher still puts me in only the moderately bullish camp.”

Others may not even be moderately bullish. “We were looking for a build of 25 to 27 Bcf, and it came in at 28. Big deal,” said John Woods, senior trader at McNamara Options in New York.

The Washington, DC, broker added that the market was a textbook case of equilibrium: “A balance between buyers and sellers.”

Forecasters see continued heat across a broad ellipsoid extending from Michigan to northeast Texas and Iowa to Tennessee for the next six to 10 days. According to Matt Rogers, president of Commodity Weather Group, “The European operational [weather model] finally joined the model consensus by offering stronger heat into the Midwest for the six- to 10-day [forecast]. This strengthens confidence slightly on at least moderate above-normal [temperature] expectations, but much-above-normal levels are also possible in this pattern.”

Longer-term models also show warmer conditions. “The East Coast trended hotter today for the 11-15 day [forecast]. California continues to mostly lean cool, but the models are attempting heat there by late in the 11- to 15-day [forecast]. Strong Texas heat is still on schedule this weekend into early next week. The tropics are still seen getting more active later next week with the best potential for a U.S. threat then in the second week of August,” Rogers said in a morning note to clients.

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