Buoyed by a much smaller-than-expected storage injection figure, natural gas futures spiked dramatically higher in the last 30 minutes of trading Wednesday as traders covered shorts initiated during the long and slow decline over the past nine and a half months. The November contract experienced a blitzkrieg of buying just after 2 p.m. EDT and prices reacted instantaneously, rocketing 32 cents in just in just two minutes and notching a fresh two-month high at $3.00. November finished just off that level at $2.981, up a cool 30 cents for the session.

According to the American Gas Association, 25 Bcf was added to underground storage facilities for the week ending Oct. 19, bringing storage levels to 93% full at 3,067 Bcf. The refill was bullish not only because it fell short of expectations centered in the 40-50 Bcf area, but also because was just a fraction of last year’s 71 Bcf injection. Storage now stands 425 Bcf above year-ago levels, down from the 471 Bcf differential a week ago.

The Eastern Consuming Region added 16 Bcf to reach 1,757 Bcf, up from the 1,741 Bcf injection the week prior. The Producing Region boosted its stores by 4 Bcf to 841 Bcf, and the Western Consuming Region showed a 5 Bcf injection to 469 Bcf.

Although all market segments were seen contributing to the buying frenzy, the non-commercial trading community had the biggest buying appetite. Market watchers agreed that discretionary fund traders, who have watched the November contract move convincingly above its 40-day moving average this week, were quick to cover shorts and establish fresh long positions.

Looking ahead, Tim Evans of IFR Pegasus made the case that the 25 Bcf injection is actually price-bearish. “The refill was lower than the heating degree day accumulations for last week suggest, tending to confirm that the back pressure from the gas already in the facilities is limiting the ability to squeeze more in. While there is no denying the resulting price action, this limited ability to compress more gas into storage could, at some stage, mean more gas on offer than can find a home, like in a game of musical chairs with too many players and not enough seats. If the music were to stop, natural gas value could drop even faster than they have risen.”

Accordingly, Evans looks for the $3.00-05 high for November futures from Sept. 14 and the failed support from July-August consolidation at $3.22 to limit the market’s upside. On the downside, failed minor resistance at $2.70-71 now stands as support.

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