Natural gas bulls, who had been attempting to rally following a two-day decline, were clubbed over the head Thursday morning after the Energy Information Administration (EIA) reported that a healthy 58 Bcf was injected into underground storage for the week ending Oct. 9.

After working its way up from an overnight low of $4.373 to a high of $4.608 just prior to the 10:30 a.m. EDT report, November natural gas futures dropped to $4.355 in the minutes that immediately followed the report’s release. The prompt-month contract ended up closing the regular session at $4.482, up 4.6 cents from Wednesday’s finish.

While the build came in smaller than both last year’s 81 Bcf addition and the five-year average injection of 64 Bcf, it was larger than most industry estimates, which focused on an injection of around 50 Bcf. Citi Futures Perspective analyst Tim Evans had been expecting a 50 Bcf build, which also happened to be the number that Bentek Energy was looking for. The injection continued the push of working gas levels in storage toward capacity while extending the new all-time record for stored gas.

Evans called the 58 Bcf build “bearish” and questioned whether the rig pullback was really having that much of an effect on supply. “The 58 Bcf net injection was higher than the consensus forecast and tighter to the 64 Bcf five-year average than expected,” Evans said. “We’d also consider this a second consecutive report that is bearish relative to the weather conditions, which suggests stronger supply.”

As of Oct. 9, working gas in storage stood at 3,716 Bcf, according to EIA estimates. Stocks are 450 Bcf higher than last year at this time and 474 Bcf above the five-year average of 3,242 Bcf. The East Region injected 38 Bcf while the Producing and West regions added 13 Bcf and 7 Bcf, respectively.

Short-term traders seem convinced that the market is heading lower. “The fundamentals look like the market should pull back a little bit, and I think we are seeing that now,” said a New York floor trader.

Commenting on the significant pullback in natural gas prices along with declines in some other commodities, United-ICAP broker Brian LaRose said the question that needs to be answered is whether a pull back in energy, equities, and metals is the start of peaking action or just a minor correction in a continuing advance. “Our [Elliott] wave counts for these various markets can be considered complete, but a break below key support is still required to imply peaking action,” he said. “Until we can confirm a bottom in the dollar we cannot confirm a top in any other market despite the possibility of wave count completion. More price action is needed.”

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