Despite having two tropical storms and a number of other disturbances on the weather radar, the nonthreatening tracks of the storms combined with a healthy storage build to help November natural gas futures work lower in its first regular session action as front month. On Thursday, the contract settled at $6.919, down 12.7 cents from Wednesday.

After winding its way lower in morning trade, the November contract put in a small rebound following the Energy Information Administration’s (EIA) announcement that 74 Bcf was injected into underground storage for the week ended Sept. 21. Prior to the 10:30 a.m. EDT report, the front month had wound its way lower to trade at $6.775. However, after the report, the November contract quickly climbed to trade at $6.840.

Market participants widely expected the 74 Bcf injection. “The market saw this one coming and it also matches the five-year average injection, so it’s really dead neutral,” said Tim Evans, an analyst with Citigroup in New York. “The market should trade on other factors, including somewhat greater uncertainty over what next week’s injection will be.”

Evans noted that there was a little scare following the number due to concerns that the EIA was changing the way it constructed its storage reports. “All of the planets must have been in alignment this week. Everyone’s expectations were almost dead on with the actual storage number,” he said. “Then there were early reports that the EIA was changing the way it releases storage information, and my immediate reaction was, ‘everybody just figured out how to forecast the number, please don’t change the structure of the report now.’ Closer investigation revealed the EIA was simply redesigning its storage report web page.”

Looking at the drop in futures Thursday, Evans said a number of factors likely played a role. “Part of the drop Thursday was putting October futures behind us. The short-covering and the rollover on October is over, so everyone can go forward with November futures now,” he said. “I also think the demand prospects going forward are relatively weak. It really does not look like we have a lot of cooling or heating demand here, which is undermining futures.”

As to whether a seasonal bottom has been established for futures, Evans said he sees the late August $5.230 low as a “trading bottom,” meaning “it is good for a trade from the long side off of that low, but don’t get married to that position. Don’t rule out the possibility that we might see a lower number later either. If we get 3.5 Tcf by the end of the injection season, we would take out last year’s high as well as the all-time high storage levels. If we get into a situation of record storage and a warmer than normal start to winter, that is a bearish scenario. We could still see lower prices…especially if we don’t see a hurricane getting into the Gulf.

“While the season has certainly lived up to its billing as an active one, there has been not that much impact on natural gas production or the U.S. coasts,” Evans said. “As this season moves along, the probability of a significant strike decreases.”

Evans added that a scan of the radar reveals that while there is significant storm activity in the Gulf of Mexico and the Atlantic, nothing looks like it is headed toward U.S. interests. “Everything’s got somebody else’s name on it,” the analyst said. “Tropical Storm Lorenzo is going to Mexico and Tropical Storm Karen is headed for Bermuda.”

Late Thursday afternoon, Lorenzo was 105 miles east-southeast of Tuxpan, Mexico traveling west at 5 mph with wind speeds approaching 70 mph. The National Hurricane Center (NHC) said Lorenzo was expected to hit the Mexico coast as a hurricane overnight. Meanwhile, the NHC said Karen was weakening some. As of late Thursday afternoon, the storm was about 845 mph east of the Windward Islands, traveling in a northwest direction at 13 mph with wind speeds of 60 mph.

“Karen is near hurricane strength; however, strong southwesterly winds are tearing into the storm, preventing any strengthening,” said Eric Wanenchak, a meteorologist with AccuWeather.com. “The upper level winds could diminish with time, and Karen could be upgraded to a hurricane as early as [Thursday].”

The 74 Bcf injection matched the five-year average for the week and was slightly below last year’s 79 Bcf injection. As of Sept. 21, working gas in storage stood at 3,206 Bcf, according to EIA estimates. Stocks are 37 Bcf less than last year at this time and 238 Bcf above the five-year average of 2,968 Bcf. For the week, the East region injected 44 Bcf, while the Producing and West regions chipped in 20 Bcf and 10 Bcf, respectively.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.