Natural gas futures values retreated Thursday morning to a low of $3.853 following the news from the Energy Information Administration (EIA) that 3 Bcf was injected into underground storage for the week ending Nov. 12. However, the December contract rallied in afternoon trade to close at $4.007, down 2.3 cents from Wednesday's regular session close.

Leading up to the 10:30 a.m. EST report, the December contract had worked its way lower to $3.972, but in the minutes immediately following the fresh data the prompt-month contract dropped to a low of $3.853 before recovering in the afternoon. The initial bearish response might have been because the report pushed storage levels to 3,843 Bcf, setting an all-time record storage level for the second consecutive week.

Despite the market's first reaction, Citi Futures Perspective analyst Tim Evans called the report "supportive," noting that it could be a precursor of things to come. "The 3 Bcf build was at the lower end of the expected range as well as below the 19 Bcf five-year average gain for the date," he said. "It may also imply a supportive shift in the background fundamentals -- reduced pipeline supply from Canada, for example. We may be seeing a 'sell the news' reaction, but this was a bullish report."

Ahead of the news, industry estimates were all over the board, with some expecting a build as high as 30 Bcf, while others were expecting a single-digit withdrawal. Evans was on the record with a 16 Bcf build estimate, while a Reuters survey of 28 industry traders and analysts produced a wide range of expectations that spanned from a build of 28 Bcf to a withdrawal of 5 Bcf, with an average expectation of an 8 Bcf build. Bentek Energy projected a 3 Bcf withdrawal.

In addition to being smaller than the five-year average, the actual 3 Bcf addition was also much smaller than last year's date-adjusted 21 Bcf build for the week.

Stocks are now 13 Bcf higher than last year at this time and 327 Bcf above the five-year average of 3,516 Bcf. For the week the East and West regions withdrew 8 Bcf and 2 Bcf, respectively, while the Producing Region injected 13 Bcf.

"I think we spiked on Wednesday when the six-to 10-day forecasts came out calling for most of the East Coast to experience significantly below-average temperatures. Why nobody wanted to hold on to it and we sold off Thursday morning, I don't know," said a Washington, DC-based broker. "We did have a fairly wide range in the industry's storage report expectations, but I wouldn't clarify a 3 Bcf addition as bearish. After we sank lower, the really interesting thing was the recovery at the end of the session to finish virtually unchanged.

"Basically, we weathered -- no pun intended -- an inventory number, and some of the other markets are up, so maybe gas will hold," he told NGI. "The longer we base here, the less likely it is to collapse back down to $3.250. Sooner or later the real cold will show up and we'll start burning some gas. At that point the market will be looking to higher prices."

The broker noted that futures are currently within a "comfort zone" from $3.500 to $4.500, but he expects when the pendulum moves, it will move to higher prices. "I think something will pop us out of the range to the upside," he said. "I'm not sure whether it will be weather or something else. Make no mistake, I'm not a raging bull here. I'm not saying we are going to get back up to $8-9, but with winter right in front of us, the bias has to be to the upside here."

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