To borrow from Mark Twain, rumors of the futures uptrend’s demise have been greatly exaggerated. One day ahead of expiration, November futures reversed course from Monday’s decline on speculation that Thursday morning might see a significantly lower injection than anticipated. The prompt month posted a 51.2-cent jump to settle at $8.402.

Tuesday’s action was a complete 180-degree turn from Monday, when the prompt month fell back below the psychological $8 mark to settle at $7.89, down 21.5 cents on the day. More important on Tuesday was the run-up seen in the remainder of the winter strip. December, which will take over as the front month on Thursday, posted a 54.1 cent increase to close at $9.363, while January-March enjoyed increases of 52.3-54.8 cents. The January contract ended the day at $9.90.

Thursday’s Energy Information Administration storage report for the week ended Oct. 22 is shaping up to be more interesting than usual, despite the fact that stocks have already surpassed the 3.2 Tcf mark and are approaching the all-time record storage level of 3,254 Bcf.

The injection will be compared to last year’s 55 Bcf build and the 37 Bcf five-year average injection. Citigroup’s Kyle Cooper is calling for a 29-39 Bcf injection, while IFR Energy Services’ Tim Evans is looking for a 40-50 Bcf build.

However, some market watchers are looking for an even lower number. Stephen Smith of Stephen Smith Energy Associates said his supply/demand model projects a storage build of only 17 Bcf (see Daily GPI, Oct. 26). Other rumors swirling around the market Tuesday seemed to support the notion of a lower-than-expected build.

A Washington, DC-based broker said the question is whether the rumors are true or not. “Speaking to the big storage operators, they were less than confident that the number would be something as high as 45 Bcf,” he said. The broker noted that a low storage injection this week could force the market in either direction in a hurry.

“If the injection is small because your facility is already full, that could be a contra-indicator in the sense that prices could plummet because nobody can store the gas and you just have to get rid of it,” he said. “The other reason, which is the one I heard, is that the injection will be low because the weather had been colder in parts of the Upper Midwest last week.” Noting that the market will see which reason is true on Thursday, the broker said Tuesday’s price action clearly points to people betting on the more bullish scenario.

Looking ahead, the broker said, “Our next major target is $10.57. If it turns out that the run-up to $7.44 on Oct. 7 was really just wave one of the move in the Elliot five-wave pattern, then this, being wave three, could be very powerful. A blow-off top somewhere north of $9-10 is certainly doable. Never underestimate the natural gas market,” he reminded.

“This market is getting somewhat overbought. However, when a bull market is overbought, it can exist for quite some time before it relieves itself and goes back to a more balanced position,” he added.

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