Following on the heels of gains achieved in the Tuesday eveningAccess trading session and amid buying frenzies both before andafter the release of fresh storage data, natural gas futures spikedsharply yesterday as traders reacquired long positions liquidatedover the past two weeks.

The November contract finished at $5.508, up 37.4 cent on theday, 50-cents for the week, and just over a nickel shy of itsall-time high set Sept. 26.

Normally, natural gas futures experience a calm before the burstof trading activity that erupts each Wednesday following therelease of AGA gas storage data. However that was not the case thisweek because of an early prediction of extremely low storageinjections by New York-based Pira Energy Group.

Bulls had little trouble taking the market higher yesterdaymorning. Just prior to the AGA release at 2 p.m. (EDT), theNovember contract was up 11.6 cents at $5.25.

A spokesperson for Pira made a “preliminary estimate” Tuesdaycalling for a meager 7 Bcf injection in next week’s storage report(see Daily GPI, Oct. 11). Thatprediction evidently weighed heavily in the minds of traders yesterdaymorning before the AGA’s release of last week’s data.

According to the American Gas Association, 62 Bcf was injectedinto underground storage facilities last week, raising the totalworking gas in storage to 2,542 Bcf or 77% full. While theinjection was larger than the 49 Bcf refill a year ago, it wasdeemed bullish by market participants because it was less than boththe 5-year average build of 63 Bcf and the range of marketexpectations focused on a 70-80 Bcf injection. At 2:30 PM (EDT) theNovember futures contract was 30.6 cents stronger at $5.46.

While traders expressed their surprise over the storageinjection with their buying tendencies yesterday, analysts weredoing so with their words. “Bullish,” was the one word adjective EdKennedy of Miami-based Pioneer Futures used to describe the storagereport. “Now that we have moved back into the $5.40s, I would notbe surprised if we re-tested prior highs at $5.565,” he said.

Without the full benefit of looking at this week’s heatingdegree-day data, Kyle Cooper, of Salomon Smith Barney thinks it isreasonable to expect a single-digit storage injection in nextweek’s AGA report. “We are still only dealing with a couple of daysworth of data, and temperatures are expected to continue tomoderate through the weekend so its still hard to tell, but itdoesn’t seem outlandish that we will see a injection in or slightlyabove the single digits,” he said.

Cooper viewed yesterday’s storage report in context ofhistorical figures. “Only three weeks this injection cycle has aregression analysis, using temperatures versus historical figures,produced a figure greater than the actual American GasAssociation’s data,” he said. And last week’s report of 78 Bcfinjection did just that, prompting some people to worry that therehad been a fundamental change. Now, in light of this week’s 62 Bcfinjection report, last week’s report looks like an aberration, hesaid.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.