Spurred by a bearish natural gas storage injection, June natural gas futures on Thursday dropped for a fifth consecutive session, recording a low of $7.650 before closing out the day at $7.681, down 7.6 cents from Wednesday's close. During the streak of down days, the prompt month -- which expires Tuesday -- has shed 39.4 cents.

While inventory fundamentals have been bearish for some time, it took the Energy Information Administration's (EIA) Thursday morning report that 104 Bcf was injected into underground storage last week for traders to really take notice -- if even for a moment. The last time June natural gas traded this low was back on May 10.

July natural gas has been following June lower over the past week. On Thursday the contract dropped 9.1 cents to $7.850.

Even with reduced trading due to trader absences ahead of the Memorial Day weekend, June natural gas futures, which were trading at $7.760 in the minutes just prior to the 10:30 a.m. EDT report, dropped to trade at $7.680. However, support right around that $7.700 level might prove too strong at this point. The prompt month rebounded to trade at $7.730 just a few minutes after the report.

"Sure it was a pretty big injection, but what has really changed?" said Ed Kennedy, a broker with Commercial Brokerage in Miami. "Yes, we have a lot of gas in storage for the time being, but take a look at the hurricane and heat forecasts. There is definitely trepidation there.

"We have very warm weather forecast to hit next week and it is expected to stick around, so we will have to see how this thing plays out," he added. "While support around $7.700 looks pretty good, I would still like to see a little more bedrock support. I still think the contract is going to go off the board Tuesday higher than where it is."

Citigroup analyst Tim Evans also saw the report as somewhat bearish when compared to expectations. "The 104 Bcf in net injections to storage for last week was higher than expected and came despite having a higher level of overall degree day accumulations," he said. "This may reflect the difference in market sensitivity between heating degree days and cooling degree days or it could be a function of added LNG imports or other supplies. It's certainly a bearish figure that represents a test of whether this is a bull market or a bear market."

Ahead of the report, some were expecting that a large injection could send prices tumbling. "If the number Thursday is bearish, we could trade down to $7.500 and linger there until expiration. I don't see the market taking off from here," said a New York floor trader.

In the immediate term, the trader looks for continuing weakness. He said he thought the market would "push a little bit lower and break $7.740, which is a little bit of a support area, and I think June will expire at around $7.500 on Tuesday."

Most industry expectations had been looking for an injection in the high 90s Bcf. A Reuters survey of 21 estimates was looking for an injection of 98 Bcf, while Golden, CO-based Bentek Energy said its Flow model indicated an injection of 97 Bcf. The 104 Bcf build dwarfed last year's 84 Bcf injection and the five-year average build of 85 Bcf.

According to EIA estimates, working gas in storage stood at 1,946 Bcf as of May 18. Stocks are 205 Bcf less than last year at this time and 334 Bcf above the five-year average of 1,612 Bcf. The East region injected 67 Bcf for the week while the Producing and West regions chipped in 23 Bcf and 14 Bcf, respectively.

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