While coming in well within industry expectations, the news from the Energy Information Administration (EIA) Thursday morning that 67 Bcf was injected into underground natural gas storage inventories for the week ending Oct. 29 put downward pressure on natural gas futures values. However, the downward pressure didn't last as the December contract reached a low of $3.743 before rebounding to close at $3.856, up 2 cents from Wednesday's close.

Some market watchers found the higher close a little confusing, especially because the storage injection turned what was a year-on-year deficit into a year-on-year surplus. The injection also brought current inventories within 17 Bcf of surpassing last year's all-time record level of 3,837 Bcf, notched for the week ending Nov. 27, 2009.

"Yes, I understand the injection was inline with industry estimates for the week, but it was a lot larger than both last year's build for the week and the five-year average," said a New York trader. "It seems to me there are a lot of bearish fundamentals surrounding this market, but maybe they've already been priced in. The only thing that is certain is that we have a heck of a lot of gas on hand."

Heading into the 10:30 a.m. EDT report, December futures were treading at $3.868, but in the minutes that immediately followed, the prompt-month contract dropped to $3.764. Futures dipped a little lower before rising to close.

In the days leading up to the report, it appeared that the industry had been expecting a build in the mid to high 60s Bcf. A Reuters survey of 25 industry players produced build expectations that spanned from 57 Bcf to 82 Bcf with an average call of an on-the-money 67 Bcf addition.

Citi Futures Perspective analyst Tim Evans, who had been expecting a 76 Bcf build, deemed the report "neutral/bearish," but he noted the bulls likely will be getting some help from the storage reports issued in the coming weeks.

"The 67 Bcf net injection to storage for last week was right in line with the Reuters and Dow Jones [67 Bcf] survey numbers, although slightly above the Bloomberg figure [64 Bcf]," he said. "And it was well above the 27 Bcf five-year average, adding 40 Bcf to the year-on-five-year average storage surplus, which jumps to 353 Bcf, the highest since last December. We see more constructive data in the weeks ahead, but weakness off this number, not strength."

In addition to being much larger than the five-year average build for the week, the actual 67 Bcf injection was also much larger than the date-adjusted 28 Bcf that was added last year for the week. As of Oct. 29, working gas in storage stood at 3,821 Bcf, according to EIA estimates. With this report erasing the deficit to last year, stocks now sit 37 Bcf higher than last year at this time.

For the week the East Region injected 39 Bcf while the Producing and West regions added 26 Bcf and 2 Bcf, respectively.

Some analysts don't see any large moves in the natural gas market anytime soon with "bargain-hunting and end-user buying setting up below us, and good selling likely to come in above $4.00 and at every logical increment higher," said Peter Beutel, president of Cameron Hanover.

In his view, "production levels are expected to remain high, and a good deal of this market's identity is likely to be shaped by the amounts injected or pulled from storage each week. This is not a strong market on its own merits. It can only be a strong market if we see healthy amounts pulled to meet space heating demand. It is brutally cold in southern New England, but it is difficult to tell how that will work itself out in next week's [report of] EIA underground storage data."

According to Beutel, "It is going to require sustained cold just to keep prices where they are. Unless we start to see producers cut back on drilling and production, or until we see solid economic growth again, it is going to be an uphill fight to build a lasting bottom."

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