Following the Energy Information Administration’s estimate that 67 Bcf was injected into underground natural gas storage during the week ended Oct. 8, November natural gas futures shot up 13 cents to notch a daily high of $6.96 as of 10:42 a.m. (EDT). However, that level did not hold.

By 11:30 a.m., the prompt month had fallen to $6.65. November zigzagged for the remainder of the session before settling at $6.803, down 4.8 cents from Wednesday’s close.

“As we’ve been noting, while some traders have been distracted by the soaring price of heating oil and the remaining 1.7 Bcf/d of production shut-ins in the Gulf of Mexico, this market is very well supplied, to the point where further production could not be stored anyway,” said IFR Energy Services’ Tim Evans. “Moreover, once heating oil finally accepts that it can climb no higher, conceding a seasonal top, then that’s going to remove one of the better excuses for natural gas to hold its ground.”

Evans said that the $6.65 low for the day may only represent minor support ahead of the $6.415-6.425 neckline to what he views as a developing head and shoulders top. “A break below $6.415 and we see the market putting heavy pressure on the $5.90 low from September 27,” he added. “We see longer-term support scaling in from $5.75 or so down through the $5.23 low from September 16, but risk that if the market chews through that buying it could target the $4.52 spot low from that date instead.”

While coming in within industry expectations, the 67 Bcf injection did fall on the low side of estimates. Evans was calling for a 65-75 Bcf net injection, while Citigroup’s Kyle Cooper was looking for a build between 66 and 76 Bcf. The injection blew away the five-year average build of 56 Bcf, but fell short of last year’s 77 Bcf injection for the week.

“I think the 67 Bcf injection was in line with expectations,” said Commercial Brokerage Corp.’s Tom Saal. Commenting on the current storage situation, Saal said, “We obviously are going to be pretty high compared to where we have been the last several years and I think the market realizes that. That is why we have these very large spread values in the futures market between the front month and the rest of the contracts.

“We’ve been hearing that the best buyers [early Thursday] were the locals,” said Saal. “They sometimes focus on the front month and that is why November was up in early trade. What these guys do is speculate on what the storage number’s impact on the market will be. Sometimes they are right, sometimes they are wrong.”

In its regular report, the EIA reported working gas volumes for the week ended Oct. 8 included a reclassification of 7 Bcf from working gas to base gas. Regarding the 7 Bcf reclassification, Saal pointed out that 7 Bcf out of 3,159 Bcf doesn’t really mean anything. “From time to time, they will reclassify this minuscule amount,” he said. “If it was a 700 Bcf reclassification, then we would have something to talk about.”

Working gas in storage now stands at 3,159 Bcf, according to EIA estimates. Current gas in storage is still approaching the all-time record level of 3,254 Bcf, which was notched during the week ending Nov. 30, 2001.

Stocks are now 178 Bcf higher than last year at this time and 211 Bcf above the five-year average of 2,948 Bcf. The East region kicked in 36 Bcf for the week, while the Producing and the West regions contributed 23 Bcf and 8 Bcf, respectively.

On Dec. 8-9, Saal will be teaming with his associate Edward Kennedy and Nymex floor trader Sandy “Trot” Goldfarb of Trot Trading Corp. in presenting a workshop entitled “Managing Natural Gas Price Risk.” For more information on the program, which will be held at the New York Mercantile Exchange, visit https://gasmart.com/workshop.

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