Natural gas futures dropped to new nine-month lows Thursday morning on the news that a whopping 102 Bcf was added to underground storage facilities last week. After having teetering precariously above support at $4.55 both on Wednesday and then again on Thursday morning, the October contract was ushered lower in a wave of knee-jerk selling after the 10:30 a.m. EDT report.

October closed at $4.471, down 17.1 cents for the session and just above the market’s new low at $4.45.

According to the Energy Information Administration, working gas in storage increased by 102 Bcf to 2,588 Bcf as of Sept. 12. In addition to being bearish in absolute terms, the triple digit refill was price-negative because the market was expecting an 85-96 Bcf refill. It was also bearish versus historical comparisons with 69 Bcf being injected during the same week last year, and a five-year average injection of 76 Bcf. By comparison, last Thursday the market experienced a 23-cent drop on the news that 97 Bcf had been added to stocks during the week ending Sept. 5.

With at least seven more weeks in the typical storage injection season, natural gas supplies are all but guaranteed of reaching the accepted “full” level of 3,000 Bcf. To be exact, weekly refills now only need to average 59 Bcf/week through Nov. 1 to reach that level. Last year when storage was approaching the 3,200 Bcf level, average refills over this period were only 32 Bcf, including an early withdrawal in the last week of October.

A better test case, however, is 2001 when storage levels were at similar levels. In that year, storage injections from mid-September through October averaged 55 Bcf. A mild November in 2001 allowed the refills to continue, and an additional 100 Bcf was stored during the month.

Based on storage arbitrage opportunities (Oct-Jan spread of more than 7 cents), and the absence of much cooling load this week, Ron Barone of UBS in New York calls for another triple digit injection to be released next Thursday. “This — when combined with the pending 67 Bcf year-ago injection comparison — should yield further deterioration in the [336 Bcf] deficit upon the release of the next EIA report. Beyond that, we expect the deficit to head toward the 175-225 Bcf range by mid-October,” he said pointing to the year ago comparisons of 47, 42, and 48 Bcf in successive weeks in 2002.

But despite the undeniably bearish supply outlook, not all market-watchers are ready to throw in the towel. “Sure it was a bearish number, but the market has held up pretty well,” announced George Leide of Rafferty Technical Research in New York. “As long as we remain above $4.44 in October and $4.65 in November, this market has a chance a making a reversal.”

Unlike many technicians who had support pegged at $4.55, Leide had a lower bar, consistent with the area of break-out from October of 2002. “The $4.44 area is where we launched the rally to $10 late last year… Buyers can be fairly aggressive down here with an upside objective at $4.82,” said Leide who noted that he could sell out of that long on a break of $4.42.

Craig Coberly of GSC Energy in Atlanta has turned decidedly bearish following the break of $4.55 and calls for a continuation down to the $4.00-20 area.

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