After free-falling lower in Friday morning trade, August natural gas futures prices barely acknowledged that an industry-expected 78 Bcf was injected into natural gas storage for the week ended June 29. Instead, the market continued to plummet to a low of $6.360 before settling at $6.444, down 17.4 cents on the day and 32.9 cents lower than the prior week’s close.

After trading at $6.480 just prior to the 10:30 a.m. EDT report from the Energy Information Administration (EIA), the prompt month continued to sink in the minutes that followed on reduced holiday volume. Heading into the report, injection expectations seemed to run from 69 Bcf to 94 Bcf, with most people looking in the mid-70 Bcf area. A Reuters survey of 20 estimates expected an injection of 80 Bcf on average. The actual 78 Bcf build was larger than last year’s 72 Bcf build but smaller than the five-year average injection of 86 Bcf.

“Right before the report was released, we had gotten through that $6.550 level, which had been seen as a triple or almost quadruple bottom,” said a Washington, DC-based broker. “I think a lot of people who were purely trading this thing were trying to get long down at the $6.550 bottom of the range in anticipation of another rebound. They were likely looking to stop themselves out if the market dropped down to $6.500, willing to risk a little bit of a loss for the possibility of a larger reward on a rise to $6.850.

“They could make 20-30 cents on the upside as opposed to a 3- or 4-cent risk to the downside. I would take that trade. However, everyone could see that coming and as soon as the contract dropped below $6.520, all those sell stops hit and traders were taken along for the ride on the short side. I think that is what we saw with Friday’s big lurch down in price following the storage report.”

As for support, the broker said a number of his company’s models are looking at the $6.300 bar. “The question is, how low can it go? Trends go for a limited amount of time and then end. I definitely think we are closer to the end than the middle of the move, but I think we still have a shot at seeing $6.300.”

Some industry experts said that while the 78 Bcf build was not bullish at face value, it was bullish by what it said about the previous week’s report. “While the build was only just below the newswire survey figures, it does ratify the idea that the data for the week ended June 22 was just a one-off bearish build,” said Tim Evans, an analyst with Citigroup in New York. “That’s constructive and puts the pace of builds back on a more supportive track going forward.”

Commercial Brokerage Corp.’s Ed Kennedy said, “We did get a surprising number Friday in that it was below what most people were looking for. The [first] sell-off actually came before the number came out and for those traders that were actually in on the day, there was a collective gasp when the number came out and they covered their shorts…I am not really surprised there wasn’t a price bounce because the injection was close to historical comparisons. I don’t think the report really mattered.”

As of June 29, working gas in storage stood at 2,521 Bcf, according to EIA estimates. Stocks are 84 Bcf less than last year at this time and 364 Bcf above the five-year average of 2,157 Bcf. The East region injected 54 Bcf for the week while the Producing and West regions chipped in 14 Bcf and 10 Bcf, respectively.

Some industry insiders are expecting supply additions to become even greater in next week’s release of inventory data. For the week ended June 30, the National Weather Service (NWS) reported actual accumulations of 55 cooling degree days (CDD), or 14 more than normal, for New York, New Jersey and Pennsylvania. For the Midwest states of Ohio, Indiana, Michigan, Illinois and Wisconsin 47 CDD were tallied, or two more than normal. However, for the week ended July 7 the NWS predicts below-normal accumulations of CDD in some regions. The Mid-Atlantic states above are expected to enjoy 39 CDDs, or nine fewer than normal, and the Midwest should see 46 CDDs, or four below average.

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