The natural gas industry was stunned last Thursday when the Energy Information Administration (EIA) reported that a whopping 108 Bcf had been injected into underground natural gas storage for the week ended Sept. 8.

The much-larger-than-expected injection helped front-month natural gas futures break below $5 for the first time in two years, and on Friday $5 cash prices had nearly disappeared nationwide with some points in the Rockies plummeting below $2.

Most industry estimates had predicted a weekly storage injection around 90 Bcf. Golden, CO-based Bentek Energy had been looking for a 90 Bcf injection, while Global Insight was expecting an 89 Bcf build. The ICAP derivatives auction held after the close of Nymex floor trading Wednesday revealed a consensus estimate of a 92 Bcf build.

The actual build also dwarfed historical comparisons. According to EIA figures, inventories rose 81 Bcf during the same week last year, and the five-year average build was 89 Bcf. At 3,084 Bcf, working gas in storage is only 116 Bcf away from the traditional full level of 3.2 Tcf, but the storage injection season is expected to last another eight weeks. If weekly injections over that time period average only half of what was stored during the week ending Sept. 8, working gas levels will rise to more than 3.5 Tcf by the beginning of the winter heating season.

Despite the surprise storage report on Thursday, one broker said it was inconsequential because the market already has factored in that a large amount of gas will be in storage at the beginning of the winter. “The storage number was bigger than anyone expected, but it really shouldn’t matter,” said Ed Kennedy, a broker with Commercial Brokerage Corp. in Miami. “The storage level this year is the biggest load of horse feathers. I will go out on a limb and predict that we will be full by the end of the injection period.”

However, the 12-year average of peak working gas levels (full) is only 3,093 Bcf, according to EIA’s weekly storage data. Most market observers would consider an extra 400 Bcf of gas in storage fairly significant. Whether the industry eventually is able to inject that much gas into storage is still unknown. Maximum working gas capacity in the United States in 2003 was 3,730 Bcf, according to NGI’s gas storage database.

With 3,084 Bcf in storage on Sept 8, stocks were 339 Bcf higher than the same time last year and 341 Bcf above the five-year average of 2,743 Bcf. Sparked by cooler temperatures, the East region injected 65 Bcf for the week, while the Producing and West regions deposited 33 Bcf and 10 Bcf, respectively.

Playing off of the significant injection, October natural gas futures on Thursday ended up closing at $4.892, down 55.7 cents on the day. The last time futures broke below $5 was on Sept. 17, 2004 when the October 2004 contract put in a low of $4.780.

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