Natural gas futures traders were unimpressed by Thursday morning’s report that a healthy 79 Bcf was injected into underground storage for the week ended Oct. 10. While the number was larger than historical figures, it was mostly inline with expectations, which allowed futures bulls to continue to push the November contract higher. The contract reached a high of $6.842 before closing at $6.703, up 11.1 cents from Wednesday’s close.

After working higher in pre-report trading, the prompt-month contract went into the 10:35 a.m. EDT report release at $6.655. In the minutes that immediately followed, the contract was trading at $6.772.

Citi Futures analyst Tim Evans called the report “just less than expected,” but noted that the market still had a bearish tint to it. “The 79 Bcf build in U.S. natural gas storage was just below the center on the range of expectations, basically just confirming that the supply/demand balance remains somewhat bearish, as the five-year average was 63 Bcf,” he said.

Rafferty Technical Research broker Steve Blair said he wasn’t really sure why the market rallied off of the storage number. “This report was much like last week’s report. We were only a few Bcf below expectations, but we reacted just like last week,” he said. “We pre-rallied ahead of the number and rallied again after we saw it. I don’t know why we are rallying off of the fact that we have nearly 3.3 Tcf in the ground as of Oct. 10 with three more reports left in the traditional injection season.

“We don’t have any cold weather on the horizon, and in fact we’ll likely lose a lot of our air conditioning load in the New York area over the next few days,” Blair added. “Thursday is likely the last day of mid- to high-70s. On Friday we are likely to be in the 60s, so that takes the air conditioning out of the picture and doesn’t really spark much heating load either.”

With the recent larger-than-normal injections, the broker said he shudders to think what the storage picture would look like if hurricanes Gustav and Ike had not come along. “Think about if we didn’t have some 30-plus percent of Gulf of Mexico production shut in,” Blair said. “There was probably another 20-30 Bcf that could have been produced. Now, not all of that would have been injected into storage, but the inventory numbers over the last couple of weeks certainly would have been higher.”

Looking at current price levels, the broker said he thinks futures have slipped into yet another trading range. “We are getting right into some of our minor resistance numbers between $6.740 and $6.860, so for right now I think you have to play the technical range between those targets and the $6.500 level. Beyond the $6.740 and $6.860 levels, we have major resistance up at $7.020, which marks the major support from a week or so ago that finally gave way on our way lower. That level is a major pivot point, but I think we will likely see this market top out in the minor resistance of $6.740 and $6.860. On the downside, $6.500 is a fairly important level. We have penetrated it, but haven’t closed below it. If we get that close below $6.500, the next support number does not come in until $6, which I don’t think is necessarily in the cards right now. So for now, you just have to play the recent range.”

Heading into Thursday’s storage report, the industry appeared to be expecting another build in the high-70 Bcf to low-80 Bcf range. Evans had been expecting an 80 Bcf build, while a Reuters survey of 23 industry players produced a range of estimates from 73 Bcf to 93 Bcf with an average build expectation of 82 Bcf. Golden, CO-based Bentek Energy said its flow model indicated an injection of 76 Bcf. For the similar week last year 49 Bcf was injected into underground stores, and the five-year average build is 63 Bcf.

As of Oct. 10, working gas in storage stood at 3,277 Bcf, according to Energy Information Administration estimates. The larger-than-normal 79 Bcf build also helped to reduce the deficit to last year’s levels while adding to the surplus over the five-year average. Stocks are now 87 Bcf less than last year at this time and 85 Bcf above the five-year average of 3,192 Bcf. The East region continued its trend of strong injections by adding 46 Bcf for the week, while the Producing and West regions chipped in 25 Bcf and 8 Bcf, respectively.

With three weeks left in the traditional injection season only 41 Bcf is needed weekly to bring supplies to a “comfortable” 3,400 Bcf, traders note.

If forecasts for heating requirements by the National Weather Service (NWS) are correct, adding 41 Bcf, or even 50 Bcf, next week may not be all that difficult. For the week ended Oct.18 the NWS forecasts a healthy decline in heating fuel requirements relative to seasonal norms. New England is expected to have 66 heating degree days, or 38 fewer than normal, and New York, New Jersey and Pennsylvania are forecast to experience 43 HDD, or 46 fewer than normal. Ohio, Indiana, Michigan, Illinois and Wisconsin are anticipated to have 47 HDD, also 46 fewer than normal.

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