When forced to make a decision between running lower on fairly bearish natural gas storage news or trading higher on influence from the crude oil futures market, July natural gas futures chose the latter, notching a high on the day of $6.22 before settling at $6.176, up 9.4 cents.

The up-day closed out the shortened week, while halting the string of consecutive decline days at six. Nymex was closed Friday due to the national day of mourning for former President Ronald Reagan.

Coming in on the bearish side of industry expectations, the Energy Information Administration reported that 102 Bcf was injected into underground natural gas storage for the week ended June 4. The sizeable injection decreased the year-over-five-year deficit to 3 Bcf from the prior week’s 8 Bcf level.

While the storage number appeared large enough to pressure the market lower, some felt that market support was adequately probed on Wednesday (see Daily GPI, June 10). As a result, some observers were looking for July to trade higher, or with crude, no matter what the storage number showed.

As it turned out, the prompt month once again tested support Thursday, trading at $5.98 at the open. Natural gas’ recent relationship with liquid petroleum products proved stronger than storage news on the day. As of 11:30 a.m., July crude futures were up 76 cents from Wednesday’s close. The crude prompt month ended the day up 91 cents at $38.45/bbl.

The industry consensus was calling for a storage injection between 95-105 Bcf, which encompasses the five-year average of 96 Bcf. However, the actual injection did not come close to last year’s 125 Bcf build.

Classifying the day’s trading as sending “a fresh round of mixed messages,” Tim Evans of IFR Energy Services said, “Prices flashed lower in response [to] the [storage] news, but ultimately decided it liked the upward correction in crude oil as its preferred influence instead.”

The analyst said he also believes that profit-taking ahead of the extended weekend shutdown may have also contributed to the rebound. “Overall, we continue to see the fundamentals for this market as mixed,” he said. “The above-average flow of injections in general over the past two months are certainly a limiting factor on prices and we have yet to see the kind of hot weather pattern suggested by the long-range forecasts settle in.”

Evans also cited the longer-term prospects for heat and hurricanes, which still give the market upside potential. However, he noted that the rally could very well originate from a lower level.

“The upward reversal in July natural gas today sets support at $5.96-5.98 more firmly in place, but it is early to tell whether what follows will prove a bear flag or pennant, or base building for a more powerful run higher,” he said. “Failing a bullish fundamental shock, a dramatic V-shaped bottom is less likely than a more gradual, rounded bottoming pattern.”

Working gas in storage now stands at 1,666 Bcf, according to EIA estimates. Stocks were 342 Bcf higher than last year at this time. The East region chipped in 67 Bcf, with the Producing and West regions contributing 22 Bcf and 13 Bcf, respectively. At 1,666 Bcf, the EIA reported that total working gas is currently within the five-year historical range.

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