Continuing to put downward pressure on the natural gas futures market, the Energy Information Administration (EIA) reported that a whopping 99 Bcf of gas was injected into underground storage for the week ended Sept. 10. The bearish report along with expectations that Gulf production will be back online soon allowed the prompt month to drop 10.5 cents to settle at $4.719.

The injection was much larger than most industry’s expectations as only a few market-watchers had the high end of their ranges going to the 100 Bcf level. Tim Evans of IFR Energy Services, for example, was calling for an 80-90 Bcf injection, while Kyle Cooper of Citigroup was looking for a build between 83 and 93 Bcf. Ed Kennedy of Commercial Brokerage Corp. pinned the number at 88 Bcf.

The 99 Bcf storage injection closely compared to last year’s 101 Bcf build, but it decimated the 81 Bcf five-year average injection for the week.

Picking up right where they left off prior to Hurricane Ivan, October natural gas futures on Thursday morning plummeted lower towards the established $4.50 support area. After selling off significantly in overnight Access trading, the prompt month hit a low of $4.64 prior to the report’s release. Once the sizeable storage build hit the market, October dropped 12 cents immediately to trade at $4.52. However, nearing the all important $4.50 support level, futures bounced higher to trade back up to $4.65 as of 11:30 a.m. (EDT).

“I think the market has certainly been influenced by Ivan in the upside for quite a few days this week,” said Jerry Rafferty of Rafferty Technical Research in New York. “Starting on Wednesday, we began to see this market correct. Storage numbers came out Thursday, the market reacted and we got down to some pretty big support levels.”

Rafferty said the main support level is from $4.44-4.40, which is where this breakout began in December 2002. “It’s very common to see markets retrace movements and I believe that is exactly what we are seeing here,” he added.

“It was nice to see the price movement we did and it was nice to see the market hold where it was supposed to. We have been in a bear market now for a long time, but this latest leg of the bear market began 10 days ago when prices broke below $5.04.”

Rafferty said the resistance levels are very clear around the $5 mark and the support levels are very clear around $4.44. “Until one side of this battle or the other is violated, we have 50-60 cents worth of trading opportunity and eventually one side or another will break out,” he said.

Commenting on the possibility of rig damage from Ivan in the Gulf, Rafferty said he didn’t believe that there will be anything found of great consequence. “Things seemed to of been shut-in pretty well, but you never know,” he said. “Once you go to turn them back on, you find out for sure.”

According to the EIA, working gas in storage now stands at 2,874 Bcf. Stocks are now 255 Bcf higher than last year at this time and 201 Bcf above the five-year average of 2,673 Bcf. The East region contributed 65 Bcf, while the Producing and West regions chipped in 23 Bcf and 12 Bcf, respectively.

Noting that the injection exceeded the five-year average injection by 18 Bcf, Tim Evans of IFR Energy Services said it appears that the storage report counter-balanced Hurricane Ivan. He noted that “the 18 Bcf by which the injection exceeded the average is on the same order of magnitude as the losses due to Hurricane Ivan so far. This suggests we may see neutral numbers next week, but nothing all that supportive,” he said.

According to the Minerals Management Service (MMS), from Monday-Thursday, the cumulative shut in natural gas production in the Gulf was 17.7 Bcf, which is equivalent to 0.3985% of the Gulf’s yearly production of gas, which is approximately 4.45 Tcf. The cumulative shut-in oil production is 3.9 million bbl/d, which equates to 0.6473% of the Gulf’s yearly production, which is approximately 605 million barrels.

As companies began their low reconnaissance surveillance flights to scan for rig damage, the MMS reported that 545 platforms and 69 rigs were still evacuated on Thursday. The survey of 53 Gulf producers found that 6.5 Bcf/d of natural gas and 1.4 million bbl/d of oil were still shut in, accounting for 53% of total daily Gulf natural gas production and 83% of total daily oil production.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.