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Late buying takes November gas futures back above $3/MMBtu

Novembernatural gas futures settled the Thursday, Oct. 6, trading session higher in late-sessionbuying, finishing well off the $2.972/MMBtu intraday low that followed the midmorningrelease of the latest storage data from the U.S. Energy Information Administration.Although the storage report outlined a larger-than-anticipated injection for thereview week, the still-shrinking surplus supported a recovery back above $3/MMBtu,with the contract settling 0.8 cent higher at $3.049/MMBtu.

Alsolending support were crude oil futures as the November WTI contract ended the day61 cents higher at $50.44/bbl, the highest close on the continuation chart in nearlyfour months.

The EIAreported a net 80-Bcf gas storageinjection during the week ended Sept. 30 that was above market expectationsbut below historical averages.

The injectionwas an upside miss against the market consensusahead of the report's release that called for a 70-Bcf build in stocks, but wasbelow the 96-Bcf injection reported for the same week in 2015 and the five-yearaverage injection of 95 Bcf.

The buildbrought total U.S. working gas supply to 3,680 Bcf, or 74 Bcf above the year-agolevel and 205 Bcf above the five-year average storage level of 3,475 Bcf.

Havingnearly erased the surplus to the year-ago level, market concerns are mounting, asthe extension of warm weather through late October could prop up demand and keepnatural gas inventories building at a lackluster pace through to the conclusionof the titular injection season on Oct. 31. Additional storage builds are likelyinto November.

Weatherwill remain the major catalyst for prices going forward, and forecasts from theNational Oceanic and Atmospheric Administration show above-average temperaturesblanketing the entire U.S. in both the six- to 10-day and eight- to 14-day periods.

Duringwhat is typically the shoulder season, when demand for heating and cooling is typicallyabsent, the above-average temperatures could keep some cooling demand, working tolimit natural gas injections going forward.

"Lookingat this storage report, it's evident to us that even under a bearish weather scenario,the structural tightening in the natural gas market can't be ignored," analystswith HFI Research said. "This will be especially true in the coming weeks asweather is forecasted to be considerably bearish fundamentally speaking, but ourcurrent projections continue to point to sub five-year average injection."

The continuedtightening of the supply/demand balance is what is supporting the market, as participantsare now considering an end-of-season supply level below the fresh record high of4,042 Bcf being touted by the EIA. Some outlooks suggest an end-of-season supplyat around 3.9 Tcf.

Takinga back seat to the storage report and midrange weather prospects, Hurricane Matthewwas making its way to the U.S. mainland Thursday. The National Hurricane Centerput the storm 65 miles south-southeast of Freeport, Bahamas, and 125 miles east-southeastof West Palm Beach, Fla., at 2 p.m. ET on Thursday. Matthew was packing winds of140 mph as it moved northwest at 14 mph.

"Onthe forecast track, the eye of Matthew should be near or over Freeport in the Bahamasin the next few hours, and move close to or over the east coast of the Florida peninsulathrough Friday night," the NHC said.

Day-aheadtrades were tugged mostly higher by demand, while the Northeast markets were softenedas load outlooks are trimmed by weather.

At TranscoZone 6 NY, trades were about 5 cents lower to an index atop $1, while Tetco-M3 tradedto around 95 cents with a similar loss. Elsewhere, Henry Hub deals were nearly 15cents higher to an index near $3, Waha added a similar amount to an average near$2.85 and Chicago gained about 5 cents to an index around $2.90. In the West, SoCalBorder trades were about 15 cents higher to an index around $2.85 and PG&E Gatetrades near $3.45 were similarly higher on the session.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storage data,go to our NaturalGas Storage Page.