After watching prices bubble higher during the overnight Access trading session, natural gas bulls were treated to a gap higher opening Tuesday morning, as concerns over storm curtailments lingered. However, once the follow-through buying had run its course and resistance in the $3.88-90 area had held, prices shuffled lower in the afternoon. The November contract finished at $3.862, up 12.2 cents on the day, but down 2.8 cents from its high for the session.

According to the Minerals Management Service, 1.7 Bcf/d of Gulf of Mexico supply was still off the market as of 3 p.m. EDT Tuesday, down from a peak of 9.9 Bcf/d Friday. Some market-watchers noted that the MMS figures only covered the offshore, while storm damage and power outages also had taken some production offline in Louisiana. And while pipelines were saying they were back up to speed, some mentioned filling in from storage to make it happen. The supply shortfall was seen in physical prices, which ticked higher Tuesday morning. NGI’s Henry Hub index averaged $3.86, up 9 cents on the day.

Looking ahead, market watchers realize that this week’s curtailments will be felt in next week’s storage report. “Lingering effects also severely limit the possibilities of storage levels significantly exceeding 3,200 Bcf,” wrote Kyle Cooper of Salomon Smith Barney in a note to clients Tuesday. “Projections now place maximum storage levels right at the 3,200 Bcf level.”

And while having 3,200 Bcf heading into the withdrawal season is just about as price bearish as storage can get, it may not be enough to take the wind out of bulls’ sails. Pointing to the an unprecedented 110 Bcf that was injected into storage last November, Cooper suggests that the year-on-year surplus — currently at 113 Bcf — could get trimmed severely or eliminated completely. “The yearly inventory change could be incredibly dramatic and perceived as bullish.”

And while he stops short of coming right out and saying that he is bullish on storage this winter, Cooper asserts that the price direction this winter — more now than ever — will be decided by how cold it gets in November. “Early cold could easily spike prices, as predictions of huge year-on-year inventory changes are projected through March. However, if the El Nino effect then moderates temperatures in January and February, withdrawals that no longer exceed year-ago levels could easily send prices right back down.”

For this week’s storage release, Cooper calls for a 36-46 Bcf build, which will compare against a 73 Bcf refill from a year ago.

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