After taking a day off from setting new 13-month lows on Tuesday, the November natural gas futures contract on expiration Wednesday got right back to exploring the depths. After reaching a new low of $3.212, the November contract went off of the board at $3.292, down 6.2 cents from Tuesday’s close. Meanwhile, the December contract recorded a low on Wednesday of $3.718 before closing the regular session at $3.763, down three-tenths of a penny from Tuesday’s finish.

Citi Futures Perspective analyst Tim Evans noted that the natural gas market “remains quiet and relatively cheap” with a “lack of significant heating demand to provide support.” He said the market is likely beginning to take into account the realization that the 2010 Atlantic hurricane season is a bust.

“With October drawing to a close, we also see the seasonal hurricane risk to production from the Gulf of Mexico as taking a further step to the downside, although a late-season blow-up from the western Caribbean or the Gulf itself is still possible,” Evans said.

Taking a peek at Thursday morning’s storage report for the week ending Oct. 22, Evans said he expects more above-average storage injections that will continue to expand the year-on-five-year average surplus.

Evans said he is expecting the Energy Information Administration to report that 60 Bcf was injected for the week ending Oct. 22, which would once again be larger than last year’s date-adjusted 24 Bcf build and the five-year average injection for the week of 45 Bcf. A Dow Jones survey of 16 industry players produced a 60-92 Bcf injection range with the average prediction coming in at 73 Bcf.

A 73 Bcf build would expand the year-on-five year average surplus significantly, but more importantly it would bring current working gas levels to 3,756 Bcf, or within 3 Bcf of last year’s 3,759 Bcf as of the week ending Oct. 23, 2009. Last year U.S. storage exited the refill season with record levels of gas.

Market technicians were watching closely Wednesday’s expiration of the November contract and the assumption of the spot position by the December contract. Some believed that if December futures managed to hold their own in Wednesday’s trading — which they ended up doing — the case for further lows may be greatly compromised.

“With the November contract expiring we will be watching intently where the December contract rolls in as spot. Should the December contract roll in above $3.536, the case for further downside would be in serious jeopardy,” Brian LaRose, an analyst with New Jersey-based United-ICAP, said Wednesday morning. If that is the case, the likelihood of further downside may be minimal, but that doesn’t mean a market advance is right around the corner. According to LaRose’s calculations, “both $3.928-3.954 and $4.455-4.631 must still be decisively exceeded to confirm” the end of an ABC bull market correction down from $6.108.

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