November natural gas engaged in its typical post-Energy Information Administration (EIA) storage report gymnastics Thursday, but traders saw other forces at work rather than the on-target EIA storage figures.

The EIA reported a build of 97 Bcf, right about what the market was expecting. At the close November had risen 2.8 cents to $3.598 and December was up by 3.2 cents to $3.916. November crude oil vaulted another $2.91 to $82.59/bbl.

Traders saw the day’s gain as much as a nervous reaction to other markets rather than anything intrinsic to natural gas. “We were expecting a number between 95 Bcf and 100 Bcf, and when the number came out, there were a number of traders short who covered in response to other markets. Crude oil trading was huge, and when everything else rallied, that’s when we spiked a little bit,” said a New York floor trader.

“The market is still a little short, and I think we may see a spike up to $3.75 and then back to $3.45 or something like that in the next week or so. With the crude and products up, some of the shorts are probably getting a little nervous and we’ll see some short-covering; $3.75, maybe $3.80 is the top end of my range, and the bottom is $3.45. I look for the low end to trade about this time next week.”

The reaction to the storage report was not without its usual fireworks. “It’s a crazy deal,” said a New York floor trader. “We make new highs off the number and that makes no sense, and then they slam it right back down to $3.547. This electronic trading makes no rhyme or reason. There is no reason for this market to rally 8 cents on a number that’s exactly where it is supposed to come in.”

The 97 Bcf was well above last year’s 84 Bcf as well as the five-year average of 74 Bcf. A Reuters survey of 26 analysts estimated an average 99 Bcf with a range of 93-104 Bcf. Ritterbusch and Associates had forecast an increase of 102 Bcf. A survey by Energy Metro Desk (EMD) resulted in a 98 Bcf average.

Last week an unexpected 111 Bcf was injected, and according to John Sodergreen, editor of EMD, a number of analysts were duly humbled by their miss. “We had almost as many folks who forecast say, 95-96 Bcf [last week] that told us they thought they saw [as much] downside risk to that number as they saw upside risk. Here’s another week we thought had good potential as a slam-dunk for the market (consensus being spot-on) but as we write this, we’re not so sure. Last week’s 111 Bcf surprise sort of took the wind out of everybody’s sails. Very few people we spoke to last week were able to rationalize that big number.”

Sodergreen himself estimated the build at 92 Bcf and said “it’s safe to say the next two weeks are likely three-digit weeks. But after that all bets are off. We also think that we’ll have a new high this year. Just saying.”

When queried about how his survey participants fared following Thursday’s report, “the vast majority came within 5 Bcf or less. I think confidence for this week is restored and I think everyone has agreed looking at the mild weather ahead we’ll be looking at triple-digit builds. The big story is that we’ll be looking at another record [storage] fill. Feel confident on betting the farm that we will have a record tally this year,” Sodergreen said.

Natural gas working inventory peaked at 3,847 Bcf in October 2010, according to government figures.

Thursday’s gains, albeit modest, may be just what opportunistic traders are looking for. Top analysts see any rise in prices as a chance to initiate selling. “It does not look to us as if natural gas prices have the wherewithal to maintain upward momentum for much more than a day or two here. Prices rallied on Tuesday on short-covering and bargain-hunting, but neither has the legs to carry prices to much higher levels before funds and commission houses see any rally as an opportunity to sell again,” said Peter Beutel, president of Cameron Hanover and publisher of Daily Oil Hedger, Thursday morning. “In that respect, short-covering only serves to resupply the sellers with fresh ammunition. This is especially true these days on Wednesday, when we have a new EIA underground storage report coming out the next day.”

Mild weather seems to be the culprit. “[W]ith mild temperatures expected across most of the nation over the next two weeks, we should expect future builds of roughly similar [90 Bcf-plus] size. There is no reason, other than the occasional bout of short-covering, to expect prices to move anywhere but lower,” said Beutel.

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