Natural gas futures plumbed new seven-week lows Thursday following the news that a stunning 127 Bcf was injected into underground storage facilities last week. Within five minutes of the 10:30 a.m. EDT report, the July contract free-fell 20 cents to $5.42. It moved lower and sideways for the rest of the session until a round of market-on-close selling put the nail in the coffin. July went off the board at $5.291, down 46.6 cents for the session and 65.4 cents below the June contract’s final resting place of $5.945.

According to the Energy Information Administration, working gas in storage increased 127 Bcf to 1,565 Bcf for the week ending June 20. In addition to surpassing the 125 Bcf refill of two weeks ago and setting a new record, the latest fill dwarfed the 81 Bcf recorded a year ago as well as the 85 Bcf five-year average. However, the real bearishness of the report, traders agreed, was its ability to surpass virtually all market expectations, which had centered on a 105-120 Bcf build.

At 1,565 Bcf, storage is now 653 Bcf less than last year at this time and 370 Bcf below the five-year average of 1,935 Bcf. And while it may sound like a price-constructive situation, the deficit is down considerably from its peak in April when storage was a whopping 891 Bcf less than its comparable 2002 mark.

“This 127 [Bcf] number is a very large number no matter how you slice it,” said EIA’s Bill Trapmann in an interview with NGI. “There is no reclassification from base gas to working gas inventories. The 127 Bcf injection is all working gas.”

Trapmann’s comments are noteworthy following the EIA announcement last Thursday that it had not accurately footnoted a reclassification of base gas to working gas in the storage report for the week ending June 6. In that report, the EIA had said that 125 Bcf was added to underground storage facilities. And while that was true, the EIA should have noted that 11 of the 125 Bcf was attributable to a reclassification by one of its respondents. It has since been learned that the respondent in question was Kinder Morgan.

With another strong weekly storage fill in the books, analysts were busy Thursday afternoon recalculating their models in an attempt to project an October 31 inventory level. Using the recent 4.5 Bcf per day increase over historical injection figures and assuming normal weather from now until November, Thomas Driscoll of Lehman Brothers in New York contemplates a season-ending storage level of 3,200 Bcf. In the nearly 10-year history of storage figures available from the government, storage has surpassed 3,200 Bcf only twice — in November of 2001 and November of 1998.

In daily technicals, George Leide of Rafferty Technical Research in New York believes the key level for the August contracts is $5.20-25. “We broke some minor levels of support on the way down [Thursday], but if we are able to break down below $5.20-25, that would be very bearish.”

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.