Natural gas futures rebounded cautiously Thursday after dropping below the $6.00 mark early in the session on the news that a larger-than-expected 90 Bcf was injected into underground storage facilities last week. The June contract finished at $6.035, down 16.3 cents for the session and 8.5 cents off its $5.95 low.

According to the Energy Information Administration (EIA), working gas in storage increased by 90 Bcf last week to 990 Bcf. As of May 16, working gas stocks were 785 Bcf less than the same time last year and 530 Bcf below the five-year average of 1,520 Bcf. In the East Region, stocks were 288 Bcf below the five-year average following net injections of 58 Bcf. Stocks in the Producing Region were 233 Bcf below the five-year average of 521 Bcf after a net injection of 24 Bcf. Stocks in the West Region were 9 Bcf below the five-year average after a net addition of 8 Bcf.

Market expectations had centered on a net injection of 78-90 Bcf. Last year at this time, the market injected 68 Bcf, and the five-year average was an increase of 78 Bcf. Last Thursday, the EIA gave traders a mixed bag of storage news by announcing a bullish storage injection of 72 Bcf and a bearish upward storage data revision of 7 Bcf.

Kyle Cooper of Citigroup said Thursday’s hefty refill indicates that natural gas is fairly priced right now for storage to reach the bottom end of the five-year band of Nov. 1 storage inventories. “There are numerous reports that gas prices must climb to $7-$8-$9 or higher to refill storage,” he wrote in a note to clients Thursday. “By our analysis, current price levels are adequate to reach the 2,800 Bcf level without extraordinary events,” he said.

However, even if the market is able to reach the 2,800 Bcf level on Nov. 1, it would not be impervious to price spikes next winter, he continued, pointing to the severely cold temperatures, high prices and heavy storage draws seen late last winter.

In the nearer term, George Leide of New York-based Rafferty Technical Research believes the market is in a holding pattern until summer heat arrives. “It’s no surprise that we are having trouble sustaining these rallies. We are still in a shoulder month and until summer arrives and there is some competition for gas from cooling loads, this market will likely remain inside its recent trading range.”

Specifically, Leide sees the market banded on the upside by the $6.72 continuation chart high from March 10 and on the downside by the $5.83 bottom of the chart gap created over the May 9-12 weekend. “As long as we stay above $5.83, we are in a bull mode,” he said, adding that if prices remain above $5.88, the outlook is even brighter.

Minor resistance is seen at $6.34 ahead of more selling likely in conjunction with another gap — created on May 10-11 — in the $6.43-50 area.

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