In another delayed reaction to bearish storage data, the natural gas futures market funneled lower for the second straight Friday. However, in contrast to the sustained selling push exhibited on Oct. 17, the market dropped lower all at once Friday, as local traders triggered sell-stop-loss orders.

The November contract was the hardest hit, shedding 13 cents in just 30 minutes. It closed at $4.786, down 12.7 cents from Thursday settle. At just 69,209, estimated volume was light for the session, leaving the door open to a reversal Monday.

Traders agreed that Friday’s weakness was attributable to a bit of residual selling following the storage data released Thursday. According to the Energy Information Administration, an 84 Bcf injection lifted stocks to 3,028 Bcf as of Oct. 17. The inventory build was seen as a negative factor for gas prices from virtually all vantage points. Not only did the refill easily surpass the year-ago and the five-year average injections of 33 and 51 Bcf respectively, it also surpassed the range of market expectations centered on a 75-80 Bcf addition.

Kyle Cooper of Citigroup is quick to point out that last week’s bearish report is not a one-time phenomenon. “This was the largest injection on record for this comparable week and now means that 2003 has established 11 new weekly maximums while tying three existing records.”

Cooper goes on to note that last week’s figure was almost 63% larger than the five-year average, and year-to-date injections now exceed the five-year average by almost 31%. “There has never been more natural gas injected into storage facilities since the middle of April, according to the EIA, since weekly records began in 1994. It is honestly becoming more and more difficult to understand why prices are not at $3.913, rather than the current $4.913 [Thursday’s close], based on fundamentals.”

Early estimates for this Thursday’s storage report are for a 60-70 Bcf figure — a number that may be overlooked as soon as it is released. In an unprecedented move last Thursday, the Energy Information Administration announced that it would revise the last four months of storage data this Thursday. Specifically, the group said it would revise data from July 4 though the present, based on a new survey methodology that would increase the number of companies surveyed from 44 to 55. Because it is thought that this will bring the weekly data closer to the monthly data, market-watchers are bracing for an upward revision in the amount of gas estimated in the ground (see Daily GPI, Oct. 24).

And though storage data will undoubtedly take center stage later in the week, it will take a back seat to updated weather forecasts Monday. If those predictions are anything like the ones being bandied about Friday, it will be a bull’s dream. According to the National Weather Service, below normal temperatures will usher in the month of November across most of the United States. Above normal temperatures are expected only in the Southwest corner of the country, with normal mercury readings predicted in West Texas, the Rockies and northern California.

In daily technicals, November has immediate support near the confluence of last Friday’s and Monday’s lows in the $4.74-75 area. Should the market fail to break below that level, bulls could gain some momentum from the weather and make an attempt at the chart gap up to $5.020-025. Should the market walk its way through that barrier, buy-stops placed just above that level could add some fuel to the rally.

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