Coming in well above the majority of expectations, weekly storage injections totaled 75 Bcf, according to the Energy Information Administration’s (EIA) gas storage report Thursday for the week ended Oct. 14. Adding to the weakness that was already prevalent in the natural gas futures market Thursday morning, the bearish report pushed the November contract even lower, eventually settling at $12.977, down 57.2 cents on the day.

In the few minutes following the 10:30 a.m. EDT report, November natural gas dropped 21 cents to trade at $12.85. The prompt month went on to bounce off of its $12.75 low on the day a handful of times just before noon. In the afternoon, November explored a little higher, reaching $13.20 before settling just below $13.

With Hurricane Wilma still looking like it intends to spare the Gulf of Mexico’s oil and gas infrastructure, the bearish storage report was the only news in town Thursday (see related story). The healthy storage injection means that either demand deconstruction is coming in at higher than expected levels or that the supply picture isn’t as troubled as many believe. The Gulf of Mexico still remains a little more than half shut-in following Hurricanes Katrina and Rita.

“It was a huge storage injection, but we really weren’t too surprised,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “We kept warning everyone that they better watch out, because once the gas starts flowing, the utilities are going to grab every molecule they can and put it into the ground.”

Kennedy said demand deconstruction also probably played a role in the sizeable build. “That very likely made more gas available,” he said. “That is both sides of the equation.”

Others weren’t so sure that demand destruction even exists. “I don’t believe in demand destruction,” said a Washington, DC-based broker. He pointed out that consumers have already begun to accept $3 gasoline, and paying more for energy was becoming accepted.

Another broker warned that despite the market’s recent weakness, he wasn’t willing to trust the idea that the bulls had lost control just yet. “It isn’t everyday you have an overnight high of $13.60 and an intraday low of $12.75 — a whopping 80 cents, but then it’s not every year prices are at such historically high values either, so it doesn’t surprise me,” said Jay Levine, a broker with Advest Inc.

“Both [natural gas] and crude are showing signs of resiliency in the face of mounting evidence that the fundamental picture isn’t all that bad, at least not as bad as prices would suggest,” he said. “While any market which is down almost $3 in the case of crude and 80 cents in natural gas is bound to rebound, both these markets have made a nasty habit of proving the masses, and fundamentals, wrong.”

As to where the market was expected to end up, Kennedy said he was looking lower. With Hurricane Wilma still looking as if it will spare the Gulf, the market’s focus appears to be on lower numbers. “The key number is $12.70, if we close below that you can kiss this bull market goodbye for a while,” the broker said.

Most industry projections had been calling for an injection in the mid-50s to low 60s. The Wednesday afternoon ICAP-Nymex storage options auction, which allows traders to hedge against or bet on the storage number, predicted a 60.3 Bcf injection for the week.

Citigroup’s Kyle Cooper raised his expectation in the days leading up to the report from something in the high 40s Bcf or low 50s Bcf to a build of 62-72 Bcf.

“The dramatic difference between the initial estimation and the final estimation resides solely in the reported injections of the larger pipes that release figures on Monday afternoon,” Cooper said. “Every major pipeline that we track east of the Rockies ended up reporting an injection larger than last week.”

The injection decimated historical comparisons. According to the EIA, 64 Bcf was injected into underground storage for the same week last year and the five-year average build is 56 Bcf. As of Oct. 14, working gas in storage stood at 3,062 Bcf, the EIA said. Stocks are now 152 Bcf less than last year at this time and 53 Bcf above the five-year average of 3,009 Bcf.

The East region led the charge with a 45 Bcf injection for the week, while the Producing region contributed 24 Bcf and the West region chipped in 6 Bcf.

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