September natural gas traded lower, then higher Thursday as traders noted that the latest storage figure came in pretty much on target. September rose 0.9 cent to $3.931 and October gained 1.7 cents to $3.906. October crude oil rose 14 cents to $85.30/bbl.

The 10:30 a.m. EDT Thursday report by the Energy Information Administration (EIA) was supposed to give the market a better idea of what to expect at the end of October when gas in storage will be matched with winter forecasts. According to one trader, the 73 Bcf build reported by the EIA may have better defined storage, but from a market perspective the resulting price action indicated indecision.

Tom Saal, vice president of Hencorp Futures in Miami, in his work with Market Profile identified Thursday’s value area at $3.894-3.965. Value Areas are important for typically the next day the market will trade within that range before going on to test other value areas. “[Thursday] was a neutral day,” he said. “We settled at the midpoint of the value area and that indicates market indecision. Often the market will settle at the high or low end of a value area and prices will move in that direction the next day.”

Saal characterized Thursday’s trading as a “flip of the coin” but indicated that all of his trading targets were at higher prices. “I think we will test the value area at $4.073-4.102 Friday but we’ll test Thursday’s value area first.”

If the market is going to test $4.07 Friday, it will have to do it amidst weather forecasts indicating the possibility of loss of energy demand should Hurricane Irene disrupt the East Coast. “The latest computer guidance has shifted the track of Hurricane Irene back toward the west, which places major metro areas from Washington, DC, to Boston at risk for significant demand disruptions late this weekend into early next week,” said Matt Rogers, president of forecaster Commodity Weather Group of Bethesda, MD. “Extensive power outages could suppress East Coast demand well into next week. Otherwise, the weather models are same-to-hotter with a surge of heat mid to late six- to 10-day [forecast], particularly for the Midwest. Chicago has a chance to reach into the low 90s late next week. Cooling returns for the 11- to 15-day, and the models even attempt to send it down to Texas, but we remain cautious.”

When the storage number was released prices tumbled but snapped back minutes later to trade in positive territory for much of the day. “A lot of traders were expecting a higher number, so they were caught a little off guard,” said a New York floor trader. “$3.855 to $3.86 is a pretty good support number, and all the black-box traders just whipped it around and this is where the market should be basically.”

Currently, natural gas in working storage stands at 2,906 Bcf, and the injection lowered the storage deficit from 175 Bcf below last year’s level at this time to 140 Bcf. The five-year storage deficit was lowered to 55 Bcf from 73 Bcf.

For the most part analysts had estimated the build correctly. At Citi Futures Perspective, analysts were looking for a build of 71 Bcf for the week ended Aug. 19, and IAF Advisors in Houston expected an increase of 76 Bcf. A Reuters survey of 27 analysts and traders revealed an average of 72 Bcf with a range of 61 Bcf to 80 Bcf. Industry consultant Bentek Energy was looking for a build of 77 Bcf. Last year 38 Bcf was injected, and the five-year average is 55 Bcf.

Bentek was slightly off the mark when it suggested that its figure might be a touch on the low side. “Demand has eased in most of the U.S. with the exception of Texas, where many facilities remain on withdrawal mode. An injection is still expected in the Producing Region and could materialize into a larger injection,” the firm said in a report.

Energy demand shows no signs of letting up in Texas. The Electric Reliability Council of Texas (ERCOT), the operator of the state’s transmission grid, declared an Energy Emergency Alert Level 2 at 3:10 p.m. CDT Wednesday due to reserves falling below 1,750 MW. Consumers and businesses were asked to reduce their use during peak hours from 3 to 7 p.m. to avert the need for rotating outages. The alert was canceled at 5:26 p.m. as interruptible loads were deployed thus negating the need for the outages.

In its 5 p.m. EDT report the National Hurricane Center (NHC) said Hurricane Irene was holding winds of 115 mph and was located 575 miles south of Cape Hatteras, NC. The forecast trajectory had shifted slightly to the west with the East Coast from South Carolina to Maine within its path.

NHC also reported that a low-pressure system 1,150 miles east-southeast of Bermuda was little more than disorganized tropical storms. It said it had a 10% chance of development into a tropical cyclone in the following 48 hours. It also reported that Tropical Depression 10 southwest of the Cape Verde Islands was holding winds of 35 mph and was moving to the west-northwest at 9 mph. NHC said it could become a tropical storm Friday.

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