Reflecting the cold snap in many regions of the country last week, the Energy Information Administration (EIA) reported a 29 Bcf weekly storage injection, which was on the low end of industry expectations and much lower than the previous two weekly injections of 75 Bcf and 77 Bcf. Putting the brakes on the bearish case at least for the session, December natural gas ended up settling at $11.689, up 8.5 cents for the day.

After gapping 7.6 cents higher in Wednesday's overnight Access trading session to open at $11.68 on Thursday, December natural gas was trading even higher at $11.74 just prior to the report's release. In the minute immediately following the report, the prompt month jumped another 12 cents to put in a high for the day of $11.86.

Following the knee-jerk reaction, December natural gas spent the rest of the session bouncing between $11.55 -- the contract's low on the day -- and $11.74 before coming to a close.

IFR Energy Services analyst Tim Evans said the market failed to respond with much of a rally following the low injection probably because the market lacks a credible follow-up threat.

"Warmer temperatures this week [are] forecast to extend on through mid-November, [which means] future storage reports will likely prove bearish," Evans said. "Ultimately, we think this report will be rated as 'insufficiently bullish' to wrest control of the market from the bears. We are 100% short December natural gas from $13.70, with a buy stop lowered to $11.90 to lock in additional profit on the trade."

Advest Inc. broker Jay Levine said that while the number was lower than expected, it was "fairly meaningless" in the grand scheme of things. "If you want to look at it in a myopic way, the smaller-than-expected injection suggests a little underlying support," he said. "Taken as a whole, it really is meaningless because of the comfortable storage levels and current market psychology. Right now, the market is less fearful of the future, which is part of the reason why the market has sold off over $3 from its $14.75 high. Right now, psychology -- along with fundamentals and technicals -- are running cool."

Levine said while that would appear to point toward still lower price levels, the energy industry doesn't always work that way. "With three out of three market tools pointing down, you would think it is a foregone conclusion that prices 'must' continue to go down. However, we know that in this industry, nothing is a must.

"This is a market that is not going to look for a lot of answers," he said. "Traders are going to jump to conclusions. As a result, the market could very easily jump back into a buying mode very quickly."

A Bloomberg survey of 16 analysts was calling for an average injection of 32 Bcf. Wednesday afternoon's ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, had predicted a 33.5 Bcf injection for the week. The 29 Bcf report came in under last year's 41 Bcf injection and the five-year average build of 34 Bcf.

Although the end of the traditional injection season is Oct. 31, the next EIA storage report is likely to show another net injection because of the warm weather across most of the nation this week. In 2001, net weekly injections continued all the way until the end of November with working gas levels starting the winter heating season at 3,254 Bcf. However, last year's peak working gas level of 3,327 Bcf was the highest level since 1990.

Working gas in storage as of Oct. 28 totaled 3,168 Bcf, or 119 Bcf less than at the same time last year and 79 Bcf above the five-year average of 3,089 Bcf. Cold weather in the East last week limited injections to 14 Bcf. The Producing and West regions chipped in 11 Bcf and 4 Bcf, respectively.

Weather data from last week formed much of the basis for the low injection estimates. The National Weather Service reported that heating degree day (HDD) accumulations for key energy markets jumped. The Mid-Atlantic states of New Jersey, Pennsylvania, and New York tallied 147 HDD or 34 more than normal and the Midwest states of Ohio, Indiana, Illinois, Wisconsin and Michigan endured 148 HDD or 26 more than normal.

However, looking ahead in the short-run, additional heating degree day accumulations may be hard to come by and temperature patterns may exert a bearish influence on natural gas prices. According to AccuWeather, the storm track is from the Pacific Northwest toward the Northern Plains and through eastern Canada. Storms traveling along this path block any attempt of cold air to move south.

"This protection will break down in time, but at least for the next few days, exceptional warmth will encompass a broad part of the nation," the weather group said. They added that in the Lower 48 states, the only locations that will have snow in the days ahead are the mountains of the Northwest and Rockies. A series of Pacific storms will bring the Cascades and northern Rockies moderate to heavy snowfall between now and Sunday. Lower elevations will see rain.

Mild weather or not, traders should have plenty of volatility to trade. Jim Ritterbusch of Ritterbusch and Associates said that "range bound futures trade roughly between $10.00 and $14.00 is looking increasingly likely into the early part of the new year."

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