Coming in slightly below most expectations, the Energy Information Administration reported that 26 Bcf was injected into underground natural gas storage for the week ended Oct. 22. Despite the moderately bullish injection, it appeared that natural gas futures had either already factored such a build into the market prior to the release or just ignored the news because storage is currently “full.”

Immediately following the report, December futures dropped 12 cents to trade at $8.69 before rebounding to trade at $8.92 as of 10:48 a.m. (EDT). The prompt month then climbed all the way up to a $9.20 high, a 42.5-cent premium to Wednesday’s close. However, December futures steadily came down the rest of the session to finish up at $8.684, down 9.1 cents for the day.

The run-up began just after the market had finished its small reaction to the storage report. Commercial Brokerage Corp.’s Ed Kennedy said it appeared that hedge funds were at work.

The 26 Bcf storage injection was largely deemed bullish when compared to last year’s 55 Bcf build and the 37 Bcf five-year average injection. Most market watchers appeared to be looking for a build within the 29-50 Bcf range, while some were looking for an injection as small as 17 Bcf. Some industry players held the belief that no matter what the number was, it didn’t matter any more.

“It was a nonevent,” said Kennedy of the report. “We’re full; that’s all you need to know. We will have another injection next week and maybe the week after. All there is to talk about now is the weather. We have to start worrying about the demand side now.”

Working gas in storage now stands at 3,249 Bcf, which is above the five-year historical range, according to EIA estimates. Stocks currently sit just 5 Bcf off the all-time record storage level recorded in November 2001 of 3,254 Bcf. Even with the small injection, stocks are still 128 Bcf higher than last year at this time and 210 Bcf above the five-year average of 3,039 Bcf.

The East Region led the injection totals by putting 14 Bcf underground for the week, while the Producing and West regions chipped in 8 Bcf and 4 Bcf, respectively.

While the injection was smaller than expected, market observers wondered whether it was because of increased demand and continued Gulf shut-ins, which could be a bullish indicator, or whether there was no place for the extra gas to be stored, which would be a bearish indicator (see Daily GPI, Oct. 27).

Commenting on the injection, IFR Energy Services’ Tim Evans said, “Normally, this would be clearly supportive for the market, but after its initial reaction, natural gas is slipping back into negative ground. This suggests a bearish interpretation as to why the injection was light, because at 3,249 Bcf it is simply difficult to line up the available supply with the tiny pockets of remaining storage capacity and it is taking growing pressure to compress the storage to a degree that accommodates the added inventory.”

He added that this leaves unsold gas available at a discount, which is actually bearish. “We also note that this week’s heating load is somewhat less than last week, and production from the Gulf of Mexico is somewhat higher,” Evans said. “This also serves to dampen any fears that we may suddenly be seeing the first signs of impending shortage as the bulls would have us believe.”

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