Concerns about the presence of a tropical storm in the Gulf of Mexico and petroleum sympathy seemed to trump the release of a bearish natural gas storage report on Thursday, as July natural gas futures ended up settling 4.5 cents higher on the day at $7.045.

The Energy Information Administration (EIA) reported Thursday morning that 112 Bcf was injected into underground storage for the week ended June 3. The number dwarfed historical comparisons for the week and was even considered bearish when compared to industry expectations, which ranged from 100 Bcf to 111 Bcf.

Immediately following the report, July natural gas futures dropped below $7.00 from a pre-report level of $7.055. The prompt month hit a morning low of $6.88 at 11:30 a.m. EDT. However, strength in the petroleum futures complex as well as concerns relating to Tropical Storm Arlene helped the natural gas futures prompt month to rally.

July crude settled $1.74 higher Thursday at $54.28, while July heating oil and July unleaded gasoline increased by 7.28 cents and 7.39 cents to close at $1.6256/gallon and $1.5714/gallon, respectively.

Also on the radar Thursday was the progression of Tropical Storm Arlene, which was upgraded by the National Hurricane Center (NHC) from Tropical Depression One after it established maximum sustained winds near 40 mph. “Interests elsewhere in the northwestern Caribbean and the southeastern Gulf of Mexico should closely monitor the progress of this system,” the NHC said in its 5 p.m. EDT update. At that time, the storm was still 115 miles south/southwest of Cuba, displaying 40 mph winds with modest strengthening possible. A Sunday landfall at the Mississippi/Alabama border with winds ranging from 39 to 73 mph is expected, the NHC said.

As eastern Gulf of Mexico producers began to evacuate nonessential personnel from rigs Thursday (see related story) , market watchers were estimating Arlene’s impact on the industry.

“There are likely to be some shut-ins too, but the further to the east the storm strays, the less production will be affected,” said Tim Evans of IFR Energy Services. “We’re confident in our initial take that the larger-than expected 112 Bcf net injection to natural gas storage was more bearish than Arlene will prove bullish, although there may be some buying again Friday as the storm draws near. By Monday though, it’s going to be all over, with prices likely to give back the gains as the heavy rains inland cut air-conditioning demand and production resumes in the wake of the storm.”

Commenting on the natural gas futures run-up Thursday afternoon, a Washington, DC-based broker said he believes it was spurred more by the sympathy with the oils than by the storm. “You’re not talking about that big of a deal storm-wise,” he said. “You’re talking about top winds of 50 mph, as I understand it.” He noted that some of the storm reaction was definitely tied to the fact that it was the first of the season.

As for the futures market’s next move, the broker said it was hard to tell just yet. “On Wednesday, we had a day that you would of thought spelled the end of this [up move],” he said. “It was a very powerful reversal signal, but the reality of it is, that is not what happened. It is true we sold off and got below $7.00, but we did not even approach the strong support area of $6.75-6.76.”

While a majority of the attention was focused on the first storm to hit the Caribbean this season, the storage build also turned a few heads Thursday. The 112 Bcf build was well above last year’s 100 Bcf build and the five-year average injection of 99 Bcf. The consensus build of the ICAP storage options auction on Wednesday afternoon showed an injection of 108 Bcf.

Working gas in storage now stands at 1,890 Bcf, according to EIA estimates. Stocks grew to 239 Bcf above last year at this time and 317 Bcf above the five-year average of 1,573 Bcf.

The East Region injected 69 Bcf into underground storage for the week, while the Producing and West regions chipped in 29 Bcf and 14 Bcf, respectively.

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