Volatility continued in the natural gas futures market early Friday as traders continued to weigh production cuts against a supply/demand balance that’s shaping up as quite loose in the near-term. The June Nymex contract was off 2.8 cents to $1.921/MMBtu at around 8:40 a.m. ET.

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The front month briefly crested the $2.00 mark earlier Friday, a move Bespoke Weather Services attributed to a drop of more than 2 Bcf/d in production, according to modeling.

“We must point out that these drops are very common on the first day of a new month, only to be revised higher, so as of right now, we would not read anything into this unless we see confirmation over the weekend,” the firm said. “…Unless the production drop holds, we still feel that the risk is to the downside at the front of the curve until we see demand come back in a notable way.”

On Thursday, the Energy Information Administration (EIA) reported a 70 Bcf injection into storage inventories for the week ending April 24. The reported build compares with last year’s 114 Bcf injection for the similar week and the five-year average build of 74 Bcf, according to EIA.

Total working gas in storage as of April 24 stood at 2,210 Bcf, 783 Bcf above last year at this time and 360 Bcf above the five-year average, EIA said.

Without “material shut-ins in the near future, market balances are going to get sloppy,” according to analysts at Tudor, Pickering, Holt & Co. (TPH).

For the current week, the firm estimates a roughly 6.5 Bcf/d week/week decline in demand from a combination of “seasonal weakness” and lower utilization of liquefied natural gas export capacity. This coincides with a drop of only 1.0 Bcf/d in supply during the same time frame, according to TPH.

“As a result, we’re expecting a build of around 110 Bcf for next week’s report, versus norms of 72 Bcf,” the TPH analysts said. “Without a 2 Bcf/d drop in supply next week, it likely sets up a second consecutive triple-digit build, pushing inventories to 21% above the five-year, compared to 18% currently.”

Genscape Inc. had overestimated this week’s reported injection, and the firm attributed the discrepancy to “larger production declines compared to what our daily pipe scrape models are suggesting.

“This happens when production is changing rapidly in areas where data is obscured by intrastate pipelines,” the firm said. “A large portion of associated and liquids rich gas production resides behind intrastate systems in Texas, New Mexico, Oklahoma and Colorado. We had the opposite problem last year when oil and liquids rich production was rapidly growing.”

June crude oil futures were up $1.16 to $20.00/bbl at around 8:40 a.m. ET, while June RBOB gasoline was down about 1.1 cents to around 77.3 cents/gal.