After trading lower in the Wednesday overnight Access session, June natural gas futures continued to fall Thursday morning, pressured by a modestly bearish natural gas storage injection and weakening June crude oil futures, which slipped below the psychological $50/bbl level.

The Energy Information Administration (EIA) reported that 54 Bcf was injected into underground natural gas storage for the week ended May 6. While the number was bullish when compared to last year’s 75 Bcf injection and the five-year average build of 72 Bcf, it was considered somewhat bearish when measured up against industry projections.

A Reuters survey of 18 industry players pinned the average build estimate at 45 Bcf. The ICAP-Nymex storage options auction, which runs from 3-4 p.m. EDT on Wednesday, revealed a consensus forecast of a 46.6 Bcf injection.

The prompt month fell even lower after the report. June natural gas slumped another 10.5 cents to trade at $6.45/MMBtu, the lower boundary of its recent trading range and 23.3 cents lower than Wednesday’s settle. After trading in the $6.50s for most of the afternoon, the prompt month ended up settling at $6.511, down 17.2 cents on the session.

June crude managed to stay under the all-important $50/bbl level for the entire session Thursday. The contract reached a low of $48.30 before settling at $48.54, down a whopping $1.91 on the day.

The question now is whether natural gas futures will be able to break to the downside out of its recent mid-$6.40 to mid-$6.70 range.

“You haven’t seen anything yet,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “The general trend in all of the energies is down and background noise from crude is a lot down. I think you’re going to see something closer to $45/bbl over there. The fundamentals are overwhelmingly bearish here and this storage report really puts the icing on the cake. I think in natural you’re going to go down and test something close to $6.35.”

“Gas is getting pulled down on its own fundamentals,” Kennedy added. He noted that supply is plentiful and although it may be colder in places like Montana or South Dakota, conditions are mild everywhere else.

Kennedy along with Commercial Brokerage Corp. partner Tom Saal and local market-maker Sandy Trot of EnergyLinks LLC. are hosting a two-day Natural Gas Futures Workshop at NYMEX June 22-23. For more information go to https://gasmart.com/workshop.

Following the latest weekly storage report, working gas in storage now stands at 1,509 Bcf. Stocks are 217 Bcf higher than last year at this time and 275 Bcf above the five-year average of 1,234 Bcf, according to EIA. The East Region injected 28 Bcf for the week, while the Producing and West regions contributed 16 Bcf and 10 Bcf, respectively.

Fimat analyst Jan Stuart said recent injections have been mainly a function of weather. “I cannot find any shifting of trends underneath the data relating to such factors as industrial demand or production,” he said. “Those trends may appear later this summer, but not at present. To do that you watch the pattern of injections relative to temperatures. If there are consistently smaller injections than the temperature data suggests, then it can be argued that there is greater industrial demand or less production.”

Trying to glean production trends alone from the data is difficult, Stuart continued. He said that final production data estimates currently available from the EIA are at least six months old by the time they are released and are not very useful for any kind of timely market analysis. “It will be necessary to get more weather data for this injection season to draw any inferences about production or industrial demand,” he said. “The current injection season is only a little over a month old.”

According to Stuart’s calculations prior to Thursday’s release, a beginning inventory to the heating season of 3,250 Bcf is likely. He cautioned, however, that in the context of today’s markets that would be seen as a bullish number. “Anything less would be highly bullish,” he added.

The EIA on Thursday also reported that the format of the Weekly Natural Gas Storage Report (WNGSR) will change with the report released on May 19. The changes were made due to the new policy that allows for an the release of revisions if necessary to weekly storage estimates on any federal workday. The new format of the WNGSR includes an additional line of text in the title immediately preceding the table, and allows for the possibility of revisions in the current as well as prior report weeks.

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