After working natural gas futures values higher in Thursday morning trade in anticipation of a lean storage report, traders had their suspicions confirmed as the Energy Information Administration (EIA) reported that 60 Bcf was injected into underground stores for the week ending June 25. Following a day of spirited trading within a wide 40-cent range, August natural gas futures ended up finishing Thursday’s regular session at $4.854, up 23.8 cents from Wednesday’s close.

Prior to the 10:30 a.m. EDT report the August contract had worked its way up to $4.642, but immediately following the fresh bullish data, it shot up to $4.737. From there, the prompt-month contract sunk into the $4.50s before taking off once again to notch the day’s high of $4.923 just after 2 p.m. EDT.

“The injection was certainly supportive,” said a New York trader. “Not only was it smaller than most industry estimates, but it was also smaller than historical comparisons. The market’s reaction was impressive and likely calls the $5 price level back into the conversation. I’m not sure we can sustain a rally, however, unless the heat returns or a hurricane in the Gulf takes a right instead of a left.”

Citi Futures Perspective analyst Tim Evans, who had been expecting a 73 Bcf build, deemed the report “bullish,” and noted it likely changes estimates for the reports going forward. “The 60 Bcf net injection for last week was at the bullish end of the range of expectations and well below the 82 Bcf five-year average for the date, a clearly bullish report that will also warrant a downward revision to our storage forecast for the next few weeks.”

Heading into the report, most industry estimates were for an injection in the mid 60s Bcf. A Reuters survey of 27 industry players produced an injection range of 59 Bcf to 74 Bcf with an average build expectation of 64 Bcf, which is the exact number that Bentek Energy’s flow model keyed in on. In its weekly storage note, Bentek noted that the shrinking storage injections are likely attributable to the warmer-than-normal temperatures covering the United States earlier than in past years.

Cooling requirements last week were stout. The National Weather Service reported that for the week ended June 26 above-normal cooling degree day (CDD) accumulations across major energy markets were recorded. New England saw 51 CDD, 30 more than normal, and New York, New Jersey and Pennsylvania were grilled under 74 CDD, 38 more than the norm. The Midwest from Ohio to Wisconsin saw 65 CDD, or 24 more than the normal seasonal tally.

In addition to outclassing the 82 Bcf five-year average, the actual 60 Bcf build also was larger than last year’s date-adjusted 73 Bcf build for the week.

As of June 25, working gas in storage stood at 2,684 Bcf, according to EIA estimates. The report increased the year-on-year deficit from 14 Bcf to 27 Bcf and decreased the year-on-five-year average surplus from 309 Bcf to 287 Bcf. The East Region led the injection charge for the week by depositing 42 Bcf, while the West and Producing regions added 10 Bcf and 8 Bcf, respectively.

Taking a closer look at the country divided into thirds, Credit Suisse analyst Teri Viswanath said that while slower injections in the Producing Region have been targeted “as the key driver” behind the growing year/year total storage deficit, she believes the real story is the reduced injections in the East Region. “Following one of the coldest winters in recent history, above-normal space heating demand in the southeast left the Producing Region depleted near five-year lows,” she wrote in a Thursday morning research note. “Since that time, storage levels have rebounded by 70% and have outpaced last year’s injections. However a very different story is emerging for the East consuming region where the 161 Bcf y-o-y storage surplus has now dwindled to only 4 Bcf. Given current weather forecasts, the possibility of stronger injections toward the end of the month for the East Region gives further support for end of season shorts.”

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