The rally in natural gas futures Thursday morning was stunted after the Energy Information Administration (EIA) reported that another 20 Bcf was injected into underground storage for the week ending Nov. 13. Even though the December contract ended up recording a gain on the day, the bottom line for traders is that even more gas has been added to the already record storage situation.

Recovering from a pre-regular session morning low of $4.157, December natural gas futures reached $4.283 leading up to the 10:30 a.m. EST storage report. In the minutes that immediately followed, the prompt-month contract slumped to $4.191, but rebounded to the day’s high of $4.364 just before 12:30 p.m. The contract went on to close the regular session at $4.342, up 8.8 cents from Wednesday’s finish.

Trudging below Wednesday’s $4.229 low on Thursday futures continued to close the gap created on Sept. 25 when the October contract — a day before expiration — put in a high of $4.035, which was followed by the newly minted prompt November contract on Sept. 29 recording a low of $4.598.

“The fact that we continued to close that gap from a few months back really is not all that surprising to me because this market has no reason to go up,” said Steve Blair, a broker with Rafferty Technical Research in New York. “There is no cold weather to speak of anywhere, nor does there appear to be any on the horizon. Add to that the overflowing storage situation and I think the bulls are kind of handcuffed here.”

Blair noted that the storage injections are likely to continue through at least the end of the month, which is pretty uncommon. “We’re set to get injections in at least the next two reports. While we injected the entire month of November in 2001, the scenario was a little different because when it was all said and done we only had 3,254 Bcf…far short of the current level of almost 3,900 Bcf.”

The traditional refill season ends Oct. 31. With 3,833 Bcf in underground stores as of Nov. 13, supplies are already 288 Bcf above the old all-time seasonal record level of 3,545 Bcf, which was set during the week ending Nov. 2, 2007. Current stocks are also 345 Bcf above last year’s peak of 3,488 Bcf, which was reached during the week ending Nov. 14, 2008.

“The only thing I see coming to rescue the bulls here is some serious cold weather,” Blair added. “Eventually, we know cold will come to the Midwest, then up through the Northeast, which will start drawing gas out of storage. However, we don’t know when that cold is coming…or how cold it will be when it gets here.”

Blair also commented on the recent “trading quietness” in natural gas futures. “With December expiration on Tuesday and the Thanksgiving holiday Thursday, I think a lot of the folks did their end-of-month business early. Volumes are down because people are getting ready for the holiday week.”

Citi Futures Perspective analyst Tim Evans said the storage report was “as expected” but noted that it favored the bears. “The 20 Bcf net injection to U.S. natural gas storage was right in line with market expectations, although there is still some bearish context surrounding the figure,” he said. “It was above the 10 Bcf five-year average build and so [it] does add 10 Bcf to the year-on-five-year average surplus. It may also be followed by reports with further bearish comparisons in the weeks ahead.”

Heading into the report, the industry appeared to be looking for an injection in the high teens to low 20s Bcf. Evans hit the nail on the head with his 20 Bcf build expectation, while Bentek Energy projected an injection of 18 Bcf. The actual 20 Bcf build was just smaller than last year’s 23 Bcf build for the similar week.

Current stocks are 347 Bcf higher than last year at this time and 419 Bcf above the five-year average of 3,414 Bcf. For the week the Producing Region led the charge with a 9 Bcf addition while the East and West regions chipped in 8 Bcf and 3 Bcf, respectively.

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