Despite the release of a storage report featuring a larger-than-expected 48 Bcf injection, natural gas futures spiked to new 16-month highs Thursday morning amid a frenzy of buying from all market segments — funds, locals and commercials. Modest profit-taking trimmed gains in the afternoon, but the was unable to erase bulls’ work. At $4.299, November finished 7.2 cents higher for the session.

According to the Energy Information Administration, working gas in storage was 3,128 Bcf as of Friday, October 11, 2002. Stocks were 60 Bcf higher than last year at this time and 244 Bcf above the five-year average of 2,884 Bcf. In the East Region, stocks were 66 Bcf above the five-year average following net injections of 29 Bcf. Stocks in the Producing Region were 119 Bcf above the five-year average of 758 Bcf after a net injection of 13 Bcf. Stocks in the West Region were 58 Bcf above the five-year average after a net addition of 6 Bcf.

For traders looking for a 30-55 Bcf injection, the 48 Bcf refill was slightly bearish. However, versus last year’s 70 Bcf addition and the five-year average injection for last week of 58 Bcf, the refill was slightly bullish. Kyle Cooper of Salomon Smith Barney estimates that 70 Bcf of supply was lost over the last several weeks due to Hurricanes Isidore and Lili. Had it not been for Lili, this week’s 48 Bcf injection would have been more than 60 Bcf, he added.

However, the storage report was trumped yesterday by cold weather–both outside traders windows as well as in their forecasts. According to the latest 6- to 10-day forecast released Thursday by the National Weather Service, below normal temperatures are expected to extend through at least Oct. 27 for central and eastern portions of the country. After experiencing a warm late summer and early fall, the eastern United States has cooled off in a hurry this week with nighttime lows dipping into the low 30s and daytime highs only reaching the 50s and 60s in many areas.

Although he admits it is very tempting to sell up at these levels, Ed Kennedy of Commercial Brokerage Corp. in Miami would feel more comfortable shorting the market once he sees some resistance. “There was good volume on the run-up, but now it has died off. I was just talking with one of the order takers [near the trading ring], and he could actually hear himself talk. Until we see some big sell orders hit the ring, I would be hesitant to try and pick a top.” Technical levels that could spawn some of that selling are layered in at $4.37, $4.44 and $4.51, he said.

On the downside, Tom Saal, also of CBC, calls on the Market Profile technical system for price direction. Specifically he is concerned with an area of “negative development” that exists between $3.84 and $4.04. In order for the market to complete a normal distribution (bell curve), this price range should be filled in, he reasons.

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