November natural gas posted a new low Wednesday as traders could find no arguments in favor of higher prices and anticipated a government storage report expected to increase the long-term surplus and narrow considerably the deficit to last year’s record storage levels. At the close November had fallen 6.8 cents to $3.570 and December had given up 6.0 cents to $3.884. November crude oil bounded higher by $4.01 to $79.68/bbl.

“We keep forging new territory to the downside. There is nothing to keep this market’s head up,” said Eric Bentley, CEO of VKNG Energy LLC in New York. He added that the market was poised “to make an assault on $3.50 and some guys are talking $3.25.”

He noted that the market was coming “into the beef of some of the roll periods” and that “Indexes [funds] will be rolling out of November contracts and buying further out contracts, putting further pressure on the front. I don’t see any [support] numbers around other than $3.50 psychological support. We easily got through that old area of $3.66 and there just weren’t any buyers left.

“Being a shoulder period with no disruptions and with traders talking a build of 93 Bcf to 96 Bcf after last week’s 111 Bcf, which was the higher end of 104 Bcf to 106 Bcf expectations, find me some sort of supportive headline and I will put holes in it,” he said.

At present natural gas storage levels are 3,312 Bcf and stand 91 Bcf less than last year and 5 Bcf greater than the five-year average. Estimates of this week’s injections will more than likely shrink the deficit to last year and raise the surplus relative to the five-year average. Last year 84 Bcf was injected and the five-year refill is 74 Bcf.

A Reuters survey of 26 traders and analysts revealed an estimated build of 99 Bcf with a range of 93 Bcf to 104 Bcf. Ritterbusch and Associates is looking for an increase of 102 Bcf and an early survey conducted last week by Energy Metro Desk resulted in an average 98 Bcf gain from a sample of 16 analysts with a range of 88 Bcf to 110 Bcf. Bentek Energy utilized its North American flow model to predict a build of 95 Bcf.

Tim Evans of Citi Futures Perspective in New York said, “[E]stimates we’ve seen so far are coming in at 95-100 Bcf, generally a bit below our models [which] projected a 100 Bcf net injection, but still well over the both the date-adjusted 84 Bcf gain from a year ago and the 74 Bcf five-year average refill.”

Not only does Evans forecast a build of 100 Bcf for this week’s report but a hefty 107 Bcf for the week ending Oct. 7. With his model showing triple-digit builds for the next four weeks, Evans calculates that the year-on-five-year surplus would rise to 205 Bcf as of Oct. 21, “maintaining downward pressure on prices.”

Bulls were momentarily heartened at the open as deeply oversold natural gas futures followed the petroleum complex higher in overnight trading. The American Petroleum Institute (API) reported an unexpected drop of 3.1 million bbl in crude oil inventories Tuesday, but expectations were for a build. Other supportive oil market factors emerged in the form of an announcement by Federal Reserve Chairman Ben Bernanke that he would implement additional monetary stimulus if the economy needed it.

Tuesday’s modest 2.1-cent gain in the November contract to $3.638 also hinted to some that the market is ready to work higher, but market technicians point out that a lot of work still needs to be done. “With $3.591-3.585 [0.618 (C)=(E)] providing support, a case for bottoming can be made,” said Brian LaRose, market analyst with United-ICAP. “However, as we have noted in the past, two ingredients are needed to complete the recipe for bottoming action: a turn higher from key support and a decisive break above key resistance. So far we only have a turn higher from support. To strengthen the case for bottoming $3.990 must be breached,” he said following Tuesday’s market close.

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