Turning in a heck of a first day on the job, the July natural gas futures contract — in its first regular session as the front month contract — jumped 31.9 cents on Thursday to close at $3.957 as the bulls took advantage of price-supportive storage news.

A smaller-than-expected 106 Bcf natural gas storage injection combined with a number of bullish storage revisions gave the bulls the opening they were looking for. Heading into the 10:30 a.m. EDT report, most traders and analysts were eyeing a build of 108 Bcf to 115 Bcf. Just prior to the release, July natural gas futures were trading at $3.593, but in the minutes that immediately followed the contract ran up to $3.810 as traders sorted through the revisions and digested the bullish news. The prompt-month contract worked higher for much of the afternoon, recording a high of $3.979 just before closing the regular session.

The Energy Information Administration (EIA) reported that 106 Bcf was injected into underground storage for the week ended May 22, which was slightly bullish compared to industry expectations. On top of that, the government agency announced that resubmissions of data from one or more respondents caused the estimate of stocks for May 15 to change from 2,116 Bcf to 2,107 Bcf. The revision changed the injection for the week ending May 15 from 103 Bcf to 102 Bcf. Historical working gas levels for the weeks ending May 1 and May 8 also were revised to reflect resubmissions of data. Stocks for the week ending May 1 were changed from 1,918 to 1,911 Bcf, and stocks for the week ending May 8 were changed from 2,013 to 2,005 Bcf.

“Taking into account all of the revisions, the grand total was a reduction of 8 Bcf over four weeks, so I don’t think it was that big of a deal to the market,” said Julio Sera, a broker with Hencorp Becstone Futures LC in Miami. “However, the report for the week ending May 22 was also supportive. Everyone had been expecting a build of 110 Bcf or 115 Bcf and we only got 106 Bcf, so that and the 8 Bcf reduction created a generally bullish bias.”

Citi Futures Perspective analyst Tim Evans noted that while the EIA news was bearish, traders should not get ahead of themselves as there is still plenty of gas in the ground. “Both the smaller-than-expected build and the downward revision to the prior week’s data are supportive for prices, although there’s still a big 393 Bcf year-on-five-year average storage surplus,” he said. “The rising surplus is still bearish, but it doesn’t look quite as bad as it did a week ago.”

While the 106 Bcf injection was bullish compared to expectations, it was certainly bearish when compared to both last year’s 87 Bcf build and the five-year average injection of 91 Bcf.

Following the report and the revisions, working gas in storage as of May 22 stood at 2,213 Bcf, according to EIA estimates. Stocks are now 524 Bcf higher than last year at this time and 393 Bcf above the five-year average of 1,820 Bcf. The East region injected 61 Bcf for the week while the Producing and West regions chipped in 30 Bcf and 15 Bcf, respectively.

Sera noted that the $4 price cap on Thursday could be telling. “Because we did not get above psychological resistance at $4, I view Thursday’s action as only a good intraday move with some short covering and fresh longs. That $4 price level is going to be interesting because I think it could be difficult to move through it and sustain the gains.”

Longer term, the broker said he is definitely bullish. “For now, I see more consolidation around the $4 area, but looking forward I see some significant gains,” he said. “Eventually we are going to get a move higher. I don’t know if it will be to the extent of the crude oil move, but I definitely think gas will move higher. As production begins to really decline and evidence of that fact appears in the weekly storage reports, I think this thing will make a move as the summer progresses.”

Supply bulls keep patiently waiting for the time when declining production will collide with steady or increasing demand. Last week Baker Hughes reported another hefty drop in the number of rigs looking for natural gas in the United States. The count dropped to 711, down 17 from the previous week and down a stout 782 from a year ago. If that decline is ever going to manifest itself in reduced supply, the weekly storage data will likely be the first to show it. The problem is it doesn’t look like it’s going to happen anytime soon.

Heading into Thursday’s session, some traders who use moving average programs to guide their trading had yet to see a buy signal. “The market is still in a downtrend, but it went to neutral when prices rallied over $4,” said an Oklahoma City broker. “It almost went positive, but currently it would need a settlement by the July contract above $3.850 to go neutral and above $4.100 to go positive.”

While the move higher in natural gas on Thursday was somewhat surprising, crude’s gains on the day were par for the course. July crude gained $1.63 to close at $65.08/bbl. Since May 15, front-month crude futures have added $8.74/bbl.

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