Traders’ concerns over what was expected to be an extremely small weekly storage injection appeared to be unfounded Thursday as the Energy Information Administration (EIA) reported that 44 Bcf was put into underground stores for the week ended Sept. 30. Dropping lower in waves Thursday, November natural gas futures ended up settling at $13.375, down 80.8 cents on the day.

After trading lower in the overnight Access session on the New York Mercantile Exchange, the prompt month dropped even lower on the storage injection. In the first few minutes following the 10:30 a.m. report, the prompt month dropped 31 cents from $13.91 to $13.60. After bouncing higher into the $13.80s, November natural gas dropped again around 1 p.m., reaching a low of $13.32 before inching higher to settle.

The sizeable loss on the day had traders guessing again as to whether Wednesday’s $14.75 high basis-November could be a top…or just another resting spot on the way higher.

“I’m not ready to call that $14.75 from Wednesday a top yet,” said Brad Florer, a broker with ICAP Energy. “I think you have to get down in the $12 area and keep it there for a little bit before it starts looking like a top, otherwise we could end up erasing this pullback pretty quickly.

“I think it was the first time where you saw some of the stronger longs decide to take some off and some serious profit-taking occurred. I would also imagine that there was also some actual selling for the first time in a while. I think we saw Thursday that some of the stronger bulls decided to get out for the first time. It was the first decent pullback we’ve had in a long time.”

Looking ahead, Florer said continual higher price levels just can’t be sustained. “I think what is happening is that the demand deconstruction that has been going on is finally starting to make its presence felt in the market a little bit, and I think the weak close Wednesday off of the highs really spooked some people,” he said. “It can’t just keep going up. Hopefully, for the economy and the majority of the people who walk around on this planet, this move was the beginning of the end of these ridiculous price levels, but who knows, we will have to wait till tomorrow to find out.”

Turning attention to the storage injection, Florer said the interesting thing is that while it was bigger than expected when compared to Wednesday’s projections, those projections had recently been revised lower from earlier in the week.

“Before Wednesday, everyone was talking about a 50 Bcf injection, and then all of the sudden people were talking about mid-30s, so I guess the report was a little higher than expected, but not by much,” Florer said. “I really think the slightly bearish report just kept buyers from deciding to come in there. I don’t think it was a big factor in all of the selling.

“Going forward, I think people are going to be watching how much demand is actually gone while keeping an eye on how quickly it is going to get cold this winter. I think the temperature of winter is ultimately going to decide where the next leg of this market goes,” he said.

Most industry experts had been expecting the injection to be a little smaller due to the fact that the report covers the week following Hurricane Rita’s arrival. Citigroup’s Kyle Cooper was looking for a build of between 29 and 39 Bcf, while the ICAP-Nymex storage options auction on Wednesday revealed a consensus forecast of a 36 Bcf injection.

While coming in above most industry expectations, the build still was well below last year’s 79 Bcf injection and the five-year average build of 72 Bcf. Working gas in storage now stands at 2,929 Bcf, according to EIA estimates. Stocks are now 151 Bcf less than last year at this time and 40 Bcf above the five-year average of 2,889 Bcf.

The East region injected 35 Bcf for the week, while the West and Producing regions chipped in 5 Bcf and 4 Bcf, respectively. With this week’s report, Producing region stocks of 787 Bcf fell below the region’s five-year average of 796 Bcf.

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