News that storage injections were recorded for every week of November for only the second time in history allowed January natural gas futures values to resume their downward trajectory on Thursday. While the prompt-month contract oscillated for a bit following the report that 2 Bcf had been injected for the week ending Nov. 27, an afternoon push lower allowed the January contract to close at $4.459, down 7.1 cents from Wednesday’s finish.

One minute prior to the 10:30 a.m. EST report the prompt-month contract jumped a nickel to $4.550, but in the minute after the release the contract put in a $4.440 low. After reaching a high of $4.570 just after 11 a.m. EST, futures steadily declined from there. Over the first four days of the week the January contract has sheared 14% of its value by declining 73.3 cents.

“What this market is coming to grips with is the fact that we’re sitting on 3.84 Tcf and there doesn’t seem to be any consistent calls for cold weather coming,” said Gene McGillian, a broker at Tradition Energy. “There is no reason for anyone to try to support prices here, so the market is continuing to grind lower. The next thing to look for is a test of the $4.150 area. If we don’t start to see some gas being pulled out of storage pretty soon, it is going to be a long winter for this market.”

While noting the weak nature of the current fundamentals, McGillian believes the market hasn’t made a return trip to the $2.409 low of early September simply out of respect for the upcoming winter and what it might bring in terms of demand. “I think we’re only going to grind lower for the foreseeable future because we still have basically all of December, then January, February and some of March to get through before we are in the clear,” he told NGI. “Some of the forecasts are calling for a colder-than-normal winter, but I’m more of a near-term forecast guy because the long-term seasonal outlooks are often wrong.”

McGillian added that the interesting thing about Thursday’s trade was what was happening in the back months. “The out months came under pressure Thursday and we started to see the back end of the board coming down. I think this shows a growing recognition that these huge supplies of unconventional gas are going to weigh on the market.”

Thursday’s 2 Bcf build completed a string of injections for the month of November — a feat that has only been accomplished one other time back in 2001. While some in the industry had been expecting a build like Bentek Energy with a 3 Bcf projection, most of the industry surveys had been calling for a draw of between 2 Bcf and 5 Bcf, while Citi Futures Perspective analyst Tim Evans had been shooting for a 15 Bcf pull. The actual injection was also bearish when compared to last year’s 64 Bcf draw for the corresponding week and the five-year average pull of 43 Bcf.

“The 2 Bcf build was bearish relative to consensus expectations for a minor net withdrawal and well below our own forecast based on degree day accumulations for a 15 Bcf net withdrawal,” Evans said. “Combined with the warming trend in the weather forecasts, this leaves the downside open for prices.”

As of Nov. 27 working gas in storage stood at a record 3,837 Bcf, according to the EIA. Stocks are now 470 Bcf higher than last year at this time and 487 Bcf above the five-year average of 3,350 Bcf. The East Region withdrew 7 Bcf while the Producing and West regions injected 8 Bcf and 1 Bcf, respectively.

If longer-term temperature forecasts are correct the storage surplus is unlikely to shrink anytime soon. MDA EarthSat in its outlook for January predicts above-normal temperatures across much of the country. North of a sinuous line stretching from Oregon to Central Texas to Virginia is expected to be above normal. The remainder of the country is expected to see normal temperatures, and only a small portion of Southern California is forecast to be below normal.

EarthSat reported that adjustments to its January forecast consisted of a “few relatively minor changes.” The changes brought in more above-normal temperatures into the Northeast and limited the cooler anomalies in Southern California. “Otherwise, the outlook remains mostly the same as last week with widespread warm anomalies still anticipated across much of the U.S,” the forecasting firm said Thursday.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.