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Triple-Digit NatGas Storage Injection Sparks Bears; Record Storage Level in Sight

The 2015 natural gas storage refill season continued at a blinding clip Thursday morning as the Energy Information Administration (EIA) reported that 100 Bcf was injected into underground stores for the week ending Oct. 9.

The build expanded the surplus to last year's level as well as the five-year average, was a few billion cubic feet larger than the industry's consensus and put 2012's record storage level well within sight.

Natural gas futures traders were quick to respond to Thursday's 10:30 a.m. EDT report. In the minutes prior, November natural gas futures were trading at $2.568, up a nickel from Wednesday's regular session close. However, in the minutes that immediately followed the release, the prompt-month contract dropped to $2.507, down 1.1 cents from the close. As of 11 a.m., the November contract was trading at $2.496, down 2.2 cents from Wednesday.

Heading into the report, Stephen Smith Energy calculated a build of 89 Bcf, and Ritterbusch and Associates was looking for an addition of 95 Bcf. A Reuters survey of 29 traders and analysts showed a sample average of 93 Bcf with a range of 86 to 104 Bcf. The actual injection was larger than both last year's 96 Bcf build and the five-year average injection of 87 Bcf.

Citi Futures Perspective analyst Tim Evans, despite being on the record with a 104 Bcf build prediction, deemed the 100 Bcf injection as "bearish," and more than expected. "The 100 Bcf build in U.S. natural gas storage for last week was a bearish surprise relative to consensus expectations for 91-93 Bcf in net injections," he said. "It was still slightly below our model’s 104-Bcf estimate however, and so mildly constructive in terms of where we would peg the background supply-demand balance. The reaction to the news sets technical resistance at today’s high."

As of Oct. 9, working gas in storage stands at 3,733 Bcf, which is 447 Bcf higher than last year at this time and 168 Bcf above the five-year average of 3,565 Bcf, according to EIA estimates. For the week, the East Region deposited 51 bcf and the Producing Region added 38 Bcf, while the West Region chipped in 11 Bcf.

At 3,733 Bcf, current storage levels are already 122 Bcf above last year's injection season high of 3,611 Bcf, while just 196 Bcf below the all-time record storage level of 3,929 Bcf, which was set for the week ending Nov. 2, 2012. With at least three or four more injections expected this season based off of historical injection cycles, 2015 storage levels are likely to eclipse the 2012 record high and threaten the mythical 4 Tcf mark.

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