Countering the combined 43.8-cent gain from trading on Tuesday and Wednesday, December natural gas futures — aided by a slightly bearish 46 Bcf storage injection report — gave back 34.7 cents on Thursday to close at $6.431. December crude futures also dropped $1.54 to finish at $65.96/bbl on the day.

Whether due to the cold snap last week or the lack of space left in underground caverns, the Energy Information Administration’s (EIA) report that 46 Bcf was injected into natural gas storage for the week ended Oct. 24 marked a stark departure from the 70 to 90 Bcf additions of the past few reports. Despite the radical change from recent weeks, December natural gas futures values dropped lower in Thursday morning trade.

Heading into the 10:35 a.m. EDT release of the report, the newly minted front-month contract was trading at $6.720, but in the minutes that immediately followed the report’s release, it was trading at $6.631. The contract put in a low of $6.350 in the afternoon before inching higher to close.

“The 46 Bcf in net injections was in the upper part of the range of expectations…” said Citi Futures Perspective analyst Tim Evans, who had been looking for a 35 Bcf injection for the week. “This may also imply somewhat higher injections for the next two weeks to the extent that it may represent a somewhat higher level of wellhead supply.”

Hencorp Becstone Futures LC broker Tom Saal said the market’s response to the report was textbook for natural gas futures. “I think the injection was a little bit higher than expected, which ended up driving crude and natural gas futures lower,” he said. “Natural gas futures has notoriously been famous for exaggerating intraday moves, so if the report was a little bit on the bearish side, the market dropped even further. From here, I see some stabilizing taking place. You have to remember, Mother Nature hasn’t changed what she is going to do and we are getting ready to enter winter.”

Leading up to the storage report, most industry surveys and estimates were looking for an injection in the 40s Bcf. Bentek Energy’s flow model indicated an injection of 48 Bcf. The actual 46 Bcf build was much smaller than last year’s 66 Bcf build, but slightly larger than the five-year average injection of 42 Bcf.

As of Oct. 24, working gas in storage stood at 3,393 Bcf, according to EIA estimates. Current stocks are in the interesting position of being 97 Bcf less than last year at this time and 97 Bcf above the five-year average of 3,296 Bcf. The Producing region injected 20 Bcf and the East region added 19 Bcf, while the West region chipped in 7 Bcf.

With only one report left in the traditional injection season, it would appear that last year’s all-time record of 3,545 Bcf in storage leaving the refill season will remain intact. However, market watchers appear to be more than comfortable entering the winter with more than 3.4 Tcf on hand.

Analysts assessing the supply-demand balance suggest continued injections into November. “I think there will be an injection for the first week in November [Nov.7], but the 14th is questionable,” said Kyle Cooper of IAF Advisors in Houston. “The 14th I don’t think will show a huge draw, and on balance the first half of November should show injections.”

Futures prices declined through November 2007. Spot futures began the month at $8.637 but by Nov. 30 had declined to $7.302.

Weather forecasts become key this time of year and get intense scrutiny. Predictions out to two weeks are hazardous at best, but AccuWeather.com shows in its 11- to 15-day outlook above-average temperatures for most of the eastern two-thirds of the country. East of a sinuous line extending from eastern Minnesota to the Texas-New Mexico border is forecast to be above normal. Only southernmost Florida is expected to be normal. In the West, north of an area defined by an arc from eastern Montana to southern Utah to southwest Oregon is forecast to be below normal.

AccuWeather.com meteorologist Elliot Abrams said on his weather blog that “the weather [in the Northeast] is masquerading like ‘Old Man Winter.’ However, this is just a false start, and a big warm-up will take place to close out the month. And, once it becomes mild, temperatures will likely be higher than the long-term averages for most of the next five to 10 days.”

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