What a difference a week can make. Just seven days after spiking to new 17-month highs, the natural gas futures market fell back down to match recent lows Thursday following news that a greater-than-expected 33 Bcf was injected into storage last week. The November contract closed at $4.133, down 12.7 cents for the session.

According to the Energy Information Administration, there was 3,161 Bcf of working gas in storage on Oct. 18, which was 33 Bcf more than the previous week. Stocks were 61 Bcf higher than the same time last year and 219 Bcf above the five-year average of 2,942 Bcf. In the East Region, stocks were 52 Bcf above the five-year average following net injections of 20 Bcf. Stocks in the Producing Region were 108 Bcf above the five-year average of 779 Bcf after a net injection of 10 Bcf. Stocks in the West Region were 58 Bcf above the five-year average after a net addition of 3 Bcf.

Versus expectations centered on a net build in the 15-30 Bcf area, last week’s 33 Bcf refill was bearish. The injection also surpassed last year’s 32 Bcf injection, serving to widen the oft-quoted year-on-year surplus — now at 61 Bcf — for the first time since the beginning of August. However, bearish storage numbers may not equate to lower natural gas prices. Upon learning last Thursday that a larger-than-expected 48 Bcf was added to storage for the week ending Oct. 11, the market took the November contract to new 17-month highs.

For Tom Saal of Commercial Brokerage Corp. in Miami, the effect the storage report has on prices is hard to gauge. “Even if I knew what the number was going to be, I am not sure that I could call the market direction,” said Saal whose 36 Bcf estimate was just off the actual injection. Instead, he continues to rely on technical factors, which he feels are solidly in bears’ favor. “By notching a new high for the move and then closing below the previous two days’ settles, we put in a key reversal pattern on the daily November chart Monday. Unless we can get back above $4.42, it will be difficult for the market to resist a continuation lower.”

However, in order for prices to dip below support at $4.00, physical demand will need to return to more normal levels. Citing degree-day heating data available from the National Weather Service, UBS Warburg analyst Ronald Barone calculated that temperatures were 36% colder than normal and 26% colder than last year. “One has to wonder if El Nino will have a meaningful effect on U.S. temperatures this winter, given continued cooler than normal fall conditions and the reality that most heating region furnaces are well broken in prior to the official Nov. 1 start of the heating season,” Barone wrote in a note to clients Thursday.

Looking ahead, forecasts call for more of the same. According to the latest six- to 10-day outlook released Thursday by the NWS, the entire country east of the Rocky Mountains save Florida, is expected to experience below-normal temperatures through at least Nov. 3. For Barone, this continuation of below normal temperatures will cause future storage refills to come close to year-ago comparisons of 32 Bcf (next Thursday), 20 Bcf, 35 Bcf, and 33 Bcf going forward.

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