Physical natural gas trading Thursday for Friday delivery was a balanced affair, with modest regional gains nearly offsetting losses and traders making sure they got deals done before the release of Energy Information Administration (EIA) storage data.

The NGI National Spot Gas Average was down a penny at $2.14, and gains in the Gulf and Northeast were offset by softer pricing in the Midwest, Midcontinent and California. Near-term weather outlooks are largely unchanged, and the EIA reported an injection of 63 Bcf, about 6 Bcf less than the consensus, and prices rose momentarily. At the close, however, December was down 4.1 cents to $2.257 and January had shed 3.8 cents to $2.423. December crude oil added 12 cents to $46.06/bbl.

It is often said the best cure for low prices is low prices, but the present “cure” seems to be taking a greater than anticipated toll on domestic drilling. It has already lasted nearly two months longer than the previous cyclical correction in 2008-2009, and if one industry executive is correct, the bleeding may persist for quite a while longer.

When asked during the Nabors Industries 3Q15 earnings conference call about the outlook for the U.S. drilling rig count, CEO Tony Petrello replied, “I did a survey of 10 customers, and the 10 customers, which account for a large chunk of U.S. drilling. And of the 10 customers, only two of the 10 refer to any [emphasis added by me] possibility of an uptick in rig count over the next six months. Six were flat and two were down and three of the 10 had some rigs on contract they were trying to farm out. So that gives you a sense where we think we are. And I think that’s a sense of 10 of the real players in the marketplace.”

Market analysts see some technical work needing to be done before the market can advance. “What’s going on here [technically] is the roll gap between November and December,” Tom Saal, vice president at FC Stone Latin America LLC told NGI. “We have a gap on the charts and that is what is exerting downward pressure. They have a tendency to be filled and so there is pressure to fill it although it doesn’t have to be filled.

“We ended trading in November at $2.033 so there is some pressure without a cold weather forecast. The pressure will be for the market to move lower until we get some cold weather. The technicians will probably want to trade the market to go lower until we get a [cold weather] forecast. We’ll see what happens first,” he said.

The gap is the 15.9-cent differential between the high of the November contract and the low of the December contract on the day of expiration. The gap was partially filled in Thursday’s trading as December traded down to a low of $2.235.

As the industry enters the final lap of the injection season, a possible bullish divergence may be setting up. Record storage was recorded in October 2012 at 3,929 Bcf, and prices reached a relative low of $1.902 in April of that year. By all accounts, inventories are poised to exceed the 3,929 Bcf record and possibly reach an unprecedented 4 Tcf by the time the last molecule is packed away.

So far prices have “only” traded as low as $1.948 (Tuesday) with record supplies expected going forward. During 2012 prices advanced, with spot futures reaching $3.93 by November 2012, a more than $2 advance.

Observers pointed out that were it not for some heating demand in the East, Thursday’s injection report could have been considerably higher. Last year 88 Bcf was injected, and the five-year average stands at 73 Bcf. For the week ended Oct. 23, IAF Advisors was calculating a 67 Bcf build and Ritterbusch and Associates looked for a 76 Bcf injection. A Reuters survey of 21 traders and analysts revealed a sample mean of 69 Bcf with a range of 62-85 Bcf.

After the EIA reported the 63 Bcf injection in its 10:30 a.m. EDT release, December futures rose to a high of $2.372, and by 10:45 a.m. December was trading at $2.355, up 5.7 cents from Wednesday’s settlement.

We had heard a build of 69 Bcf to 68 Bcf, somewhere in there,” said a New York floor trader. “For support you’ve got to be $2.25 on the downside in the December and $2.50 on the upside.”

Analysts see the supply-demand balancing firming, at least a little. “The 63 Bcf build for last week was the second consecutive bullish-side miss versus expectations, suggesting that the background supply-demand balance may be firming,” said Tim Evans of Citi Futures Perspective. “However, the market still faces upcoming warm weather that will translate into more robust injections, with the total still on track to clear 4.0 Tcf to set a new record.”

Inventories now stand at 3,877 Bcf and are 409 Bcf greater than last year and 153 Bcf more than the five-year average. In the East Region 33 Bcf was injected, and the West Region saw inventories increase by 7 Bcf. Stocks in the Producing Region rose by 23 Bcf.

Forecasters are calling for only a slight decrease in heating requirements in their near-term outlooks. WSI Corp. in its Thursday six- to 10-day outlook said the “period forecast continues to call for highly anomalous warmth over the eastern two-thirds and below average temps over the West. [Thursday’s] forecast is similar to yesterday aside from localized daily differences. GWHDDs are down 0.3 to 47.6 for the CONUS. Forecast confidence is above average. Medium-range models are in good agreement and have been consistent with the amplified -PNA [Pacific North American] driven pattern. However, there are the typical technical and timing differences late in the period as the pattern begins to relax.

“There is a slight downside risk across the majority of the interior West, Front Range and even the northern Plains. The southern U.S. might run even warmer.”

In the physical market greatest changes were seen in New England. Deliveries to the Algonquin Citygate fell 43 cents to $5.82 and gas at Iroquois, Waddington eased 3 cents to $2.68. Gas on Tenn Zone 6 200L added 22 cents to $4.87.

Differentials between the newly expanded REX Zone 3 and Marcellus points held steady. Gas on Millennium came in at 96 cents, down 4 cents, and gas on Transco-Leidy Line was quoted a penny lower at $1.05. On Tennessee Zone 4 Marcellus gas changed hands at $1.02, down 2 cents and packages on Dominion South were seen at $1.25, down 16 cents.

Downstream Midwest market points were mostly flat. Gas on REX at the Midwest interconnect at Edgar were unchanged at $2.12 and gas at the Moultrie Country, IL, junction with NGPL were also flat at $2.15. Gas on Rex Zone 3 Shelby ANR held steady at $2.14, and gas on Panhandle Eastern at Putnam County, IN, were also unchanged at $2.14.

Major Hubs were mostly lower. Gas at the Henry Hub was quoted at $2.10, unchanged, and packages at the Chicago Citygate were seen at $2.34, down 10 cents. Deliveries to El Paso Permian fell 3 cents to $2.03, and gas at the PG&E Citygate shed a penny to $2.64.