Seeming to hitch its wagon to petroleum futures once again, June natural gas followed both crude’s plunge in the morning and its climb in the afternoon. With a hint of irony, June natural gas ended up settling 5.2 cents lower on the day at $6.748, the same price at which May natural gas futures expired a day earlier.

The Energy Information Administration (EIA) said Thursday morning that 73 Bcf had been injected into underground natural gas storage for the week ended April 22. The injection was inline with market expectations, and as a result the new natural gas futures prompt month showed only a slight blip immediately following the report’s release. In fact, based on the reaction, traders may have been fearing a slightly larger build. June natural gas climbed from the day’s low of $6.615 to trade at $6.70 immediately following the report’s release.

Thursday’s trading action followed a crazy expiration Wednesday, where June natural gas dropped 38.1 cents to settle at $6.80 (see Daily GPI, April 28).

“We had the big sell-off Wednesday and Thursday morning,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “Now we are consolidating and I think we have more short-covering yet to come.”

Kennedy said the question now is how much higher can it go in this phase. “I think we could get to the upper $6.80s, but that would be about it,” he said. “I just can’t see a bullish case in this market for an extended period now. There is no demand to speak of regarding weather and there are high levels of gas in storage.”

As for trading ahead of the weekend, Kennedy said he expects more stabilization on Friday due to the severity of the down move Wednesday. “Markets go from no price control — which is what Wednesday was — to price control. It takes a while to reestablish the auto-flow on the trading floor, so we might have one more day of stabilization. I can’t see anything on the weather front that would scare anybody from their positions this weekend.”

June natural gas followed a similar path taken by June crude on Thursday. Crude dipped to a low on the day of $49.80 before springing back up to settle at $51.77/bbl, a 16-cent increase on the day.

As for the idea of a tie between natural gas and crude futures, Kennedy said that notion “is fun for the feeble minded.” He added that anybody who really thinks there is a connection between natural gas and crude, obviously doesn’t know what they are talking about. “One of them is a domestic commodity with a heating and cooling season, while the other is an international commodity at the whims and foibles of a number of politicians and country leaders.”

The 73 Bcf natural gas storage build just edged out last year’s 71 Bcf injection, but once again decimated the five-year average comparison, which was a 51 Bcf build for the week. Despite the surplus to the five-year average, traders had this number pegged before it went public. The ICAP options auction gave a consensus forecast of a 73.4 Bcf. injection, and a Dow Jones survey of 32 market players revealed an average prediction of a 72 Bcf injection.

“No offense to the all of the media that take the polls, but that Nymex-ICAP auction has been right on the money,” Kennedy said. “The thing about the ICAP auction is that it is actually people who trade, while the media talks to traders as well as Wall Street analysts. That’s all well and good, but they don’t all trade. So if the storage number ever comes in away from the ICAP auction number, you know you are going to get a market reaction.”

Working gas in storage now stands at 1,416 Bcf, according to EIA estimates. Stocks are now 272 Bcf higher than last year at the same time and 319 Bcf above the five-year average of 1,097 Bcf.

The East region led the injection charge by contributing 45 Bcf, while the Producing and West regions chipped in 20 Bcf and 8 Bcf, respectively.

Compounding the bloated inventory situation is unfavorable economic data suggesting a slow-down in the U.S. Economy. The durable-goods report from the Commerce Department released Wednesday was the latest signal that higher oil (and gas) prices are affecting the U.S. economy. The report showed a decline in durable goods orders of 2.8% in March, the largest drop since September 2002. March thus marked the third decline in a row for durable-goods orders. Analysts had been expecting an increase of 0.3%. Orders are down 1.7% year-over-year.

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