Following Thursday morning’s report from the Energy Information Administration (EIA) that a healthy 46 Bcf was injected into underground natural gas storage for the week ended April 17, futures traders took advantage of the bearish news to push the May contract to new lows for the move. The front-month contract ended up closing out Thursday’s regular session at $3.409, down 12.3 cents from Wednesday’s finish.

Just prior to the 10:30 a.m. EDT report, May natural gas was already trading at the depressed level of $3.453 as traders anticipated the significant storage build. However, once the report was released, the contract dropped to a low of $3.380, marking a new low for the larger down move. Thursday’s low erased the previous low for the move of $3.448, which was recorded Tuesday. Thursday’s sub-$3.500 close could be key as some traders have linked the price level with fairly strong support. Others see the slow grind lower of the last few months as being largely intact.

“The storage reports continue to confirm that we have an awful lot of gas, so there is really nothing new on that front,” said Ed Kennedy, a broker with Hencorp Becstone Futures LC in Miami. “Not much has changed out there. A couple of the commodity funds are continuing to press the short side and we are seeing some scaled-down buying by the storage folks. One thing to note, however, is that scaled-down buying won’t stop the move to the downside, but it will soften it a bit.”

Kennedy noted that the bulls still don’t have any real traction. “The bulls are likely exchanging their favorite recipes amongst each other because they really don’t have anything else to talk about with these fundamentals. There is plenty of gas for the time being. Sure, the cure for low prices is low prices and reports of more shut-ins — like Chesapeake announced last week — are going to affect price down the road, but there is nothing for the bulls in the short term to pin their hopes on.”

So far, the reduced drilling has not translated into lower production levels. Large storage injections — as evidenced by Thursday’s report — are still coming in despite the fact that drillers have been laying down rigs left and right with the tally as of April 17 down to 760 rigs drilling for natural gas in the United States, according to Baker Hughes. This is the lowest level seen since March 2003.

That said, the broker believes the downside probably does not have much left in the tank. “I don’t think we can fall much lower here,” he said. “I don’t have any interest in the short side of this thing, but the only buying I’m doing is for storage people. Longer term we could get a surprise on the weather, which could get this thing turned around, but nothing in the near term.”

Citi Futures Perspective analyst Tim Evans noted that Thursday’s storage report continued to grow the current surplus over historical comparisons. “The 46 Bcf net injection to storage for last week was on the high side of consensus expectations and also above the 35 Bcf five-year average,” he said. “This bumps the year-on-five-year average surplus up to 322 Bcf and keeps downward pressure on prices.”

Evans had been looking for an injection of 40 Bcf, while a Reuters survey of 23 industry players produced a narrow range of injection estimates from 29 Bcf to 49 Bcf with an average build expectation of 43 Bcf. Bentek Energy said its flow model indicated an injection of 51 Bcf.

In addition to outpacing the 35 Bcf five-year average, the actual 46 Bcf injection was also much larger than last year’s 25 Bcf build. Stocks are now 459 Bcf higher than last year at this time.

According to the EIA, working gas in storage stood at 1,741 Bcf as of April 17. For the week, the Producing region injected 23 Bcf while the East and West regions contributed 17 Bcf and 6 Bcf, respectively.

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