Following Thursday’s 24 Bcf natural gas storage injection report, which was slightly bullish when compared to the industry’s expectations, the May natural gas futures contract rode a roller-coaster of price peaks and valleys before finishing the day almost unchanged. After trading a 35.2-cent range between $10.593 and $10.945, the prompt-month contract ended up finishing Thursday’s regular session at $10.790, up less than a penny from Wednesday’s close.

June crude continued its recent retreat in Thursday’s session, recording a low of $114.40/bbl before closing at $116.06/bbl, down $2.24 from Wednesday’s finish.

Coming in just below most industry estimates, the Energy Information Administration (EIA) reported Thursday morning that 24 Bcf was injected into underground natural gas stores for the week ended April 18. The number was greeted as bullish by natural gas futures traders, who pushed the May contract up near $11 in morning trade. Prior to the 10:30 a.m. EDT report the prompt-month contract was trading at $10.722. In the minutes that immediately followed the storage number’s release, May natural gas skyrocketed to a high of $10.945. From there the contract retreated to the day’s low before inching higher to close.

Citigroup analyst Tim Evans said the production outage in the Gulf of Mexico likely contributed to the smaller injection. “The smaller-than-expected build suggests we’re now seeing a more robust impact from the Independence Hub outage,” he said. “This figure is bullish relative to expectations and also compared to the 46 Bcf five-year average. The year-on-five-year average deficit widens to 25 Bcf.”

After a leak was discovered on the Independence Hub connecting pipeline on April 8 (see Daily GPI, April 10), Enterprise Product Partners LP, the majority owner, said it expected repairs to take one to four weeks. On Wednesday the company said the repair should be completed in the next two weeks, which would put the Independence Hub back on-line four weeks from the original outage (see Daily GPI, April 24).

Independence Hub in operation or not, some traders still argue that there is no problem with supply or storage. “There is this lunatic fringe contingent out there that thinks there is going to be trouble refilling storage this year. Sure, the Independence Hub is out, but in 2005 we shut in all of the gas in the Gulf and we still refilled storage,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “I do think we have large speculative interests — aka ‘funds’ — in here buying. Inexplicably and irrationally they are trading natural gas with crude. Crude has been in a bull market for five years, and natural gas has been in a bear market for five years; how can you say there is a correlation? That said, for the last month or so there has been a link between the markets. Sometimes things are true because people think they are. It normally doesn’t last long because the world will do whatever it can to prove you wrong.”

Looking at new resistance points, Kennedy said his next level is $11.060 to $11.120. “I would love to be a bear here, but I have no desire to be fuzzy-wuzzy,” he said. “Other than price, I need a reason to sell it, and technically I am not getting it. So, I am going to have to bide my time. I’ve learned not to step in front of freight trains. I think we will see that $11.060 to $11.120 level.”

The number was slightly below expectations. Golden, CO-based Bentek Energy had said its flow model indicated an injection of 31 Bcf. A survey of 22 industry analysts by Reuters showed a median estimate of a 30 Bcf injection with a range in the survey of 21 to 40 Bcf. A Dow Jones poll revealed an average 29 Bcf injection. Last year’s report for the week showed no change.

As of April 18, working gas in storage stood at 1,285 Bcf, according to EIA estimates. Stocks are 274 Bcf less than last year at this time and 25 Bcf below the five-year average of 1,310 Bcf. The East region injected 16 Bcf, while the West and Producing regions chipped in 5 Bcf and 3 Bcf, respectively.

Moderate temperatures this week won’t spark much need for heating or cooling loads, which should enable a robust injection. The National Weather Service (NWS) forecasts for the week ended April 26 below-normal accumulations of heating degree days (HDD) and no cooling degree days for major energy markets. The NWS predicts that New England will experience 63 HDD, or 55 fewer than normal, and New York, New Jersey and Pennsylvania will see just 49 HDD, or 49 fewer than normal. The industrialized Midwest states of Ohio, Indiana, Michigan, Illinois and Wisconsin are forecast to endure a modest 45 HDD, or 56 fewer than normal.

Other market participants also see the heavy hand of funds in the natural gas futures market. Commenting on Wednesday’s hefty 17.4-cent gain in the May futures contract to $10.781, one New York floor trader said he was seeing increased interest on the part of funds and managed accounts.

“The market was up on funds initiating new length in June, and rolling long May positions into June,” the trader said. Natural gas options expire Friday and the trader said he didn’t see the market being bearish enough that the $10.500 options strikes would see much activity. “$10.750 and $11 would be the more likely area that the market would settle rather than going back down to $10.500. Sellers of $10.500 put options will want to see the market stay firm,” he said.

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