Employing its new methodology announced last week, the Energy Information Administration (EIA) on Thursday revised 16 weeks of storage data going back to July 4. The net effect of that revision was to increase the estimated amount of gas in storage by 38 Bcf. Add in the 55 Bcf weekly injection also released Thursday, and storage now stands at 3,121 Bcf — 93 Bcf above the level EIA reported a week ago.

Natural gas futures dropped sharply on the news, leaving the new prompt month — December — at a new 10-month low of $4.64. It settled at $4.71, down 14.8 cents for the session. At 82,445, estimated volume was moderate for the session, suggesting that some traders took a wait-and-see approach.

Although the 55 Bcf net injection for last week was below the 60-70 Bcf range of expectations, it easily exceeded the year-ago and five-year average refills of 11 Bcf and 36 Bcf, respectively. Furthermore, the net 93 Bcf increase from previously reported levels added to the downward price pressure.

The most compelling evidence that the market is dealing with a bearish supply-demand situation, however, is how the new data stacks up against historical levels. The year-on-year deficit has now shrunk to just 51 Bcf from a revised level of 95 Bcf the prior week and 147 Bcf the week before. Meanwhile, the surplus to the five-year average has quickly grown to 82 Bcf after having been in a deficit situation just two weeks ago.

Using an improved storage methodology, the EIA now says working gas levels exceed the 3.1 Tcf level, which most market observers would agree is more than adequate to meet normal winter demand. Under the new storage methodology, EIA now surveys 55 storage operators each week rather than the previous 44 companies. The new sample covers larger percentages of the total storage marketplace, including the equivalent of 91.4% of the working gas storage capacity in the Consuming Region East, 95.5% of the Consuming Region West and 93.2% of the Producing Region (see Daily GPI, Oct. 30).

While it was generally expected that the net impact of the revision would be upward, the 38 Bcf addition to the last report was more than most market watchers expected. “I believe [Thursday’s] report will indicate a small upward revision to the October 17 report of 3,028 Bcf,” wrote Kyle Cooper in a note to clients Wednesday evening. “[It] could be argued that the revision is possibly in the 30-40 Bcf range.”

Although a net increase of gas in storage is rarely a price-supportive factor, market watchers were able to find a silver lining for bulls. “The 55 Bcf injection is more in line with typical injections for the month of October,” noted Tom Saal of Commercial Brokerage Corp. in Miami. “It follows the trend of diminishing storage injections as we head toward November.”

In daily technicals, there exists a rollover gap between Thursday’s low for December at $4.64 and November’s high Wednesday of $4.51. And while a gap like that would usually be a target for locals and speculative traders, Saal is not convinced it will stand out from the myriad of other gaps that exist. “Looking at the daily continuation chart, there [is] a minefield of gaps out there,” he said.

While Saal would like to be cautiously bullish purely on technical factors, he admits that fundamentals are king at this point in the calendar. “You can look at the technicals all you want, but that does not obscure the fact that this market has built in a huge winter premium based on an expectation for a cold winter. Unless or until that weather shows up, this market can grind lower.”

Tim Evans echoed Saal’s bearish sentiment and is short on paper from $4.82 with a buy stop at $4.97 to limit his risk.

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