Following the EIA’s slightly bearish storage report of a 76 Bcf build for the week ended May 7, the June natural gas futures contract plummeted 14.5 cents from the pre-storage release level of $6.47 to trade at $6.325 as of 11:10 a.m., leaving many market observers wondering how much further futures would fall.

They didn’t have to wait long for an answer as the prompt month bounced off of the day’s low and ended up closing at $6.48, up 7.5 cents on the day. June crude futures climbed 31 cents to settle at $41.08, just 7 cents shy of the all time high set in October of 1990.

“Looks like we still have some strength in gas,” a Washington, DC-based broker said. “After selling off following the storage announcement, futures recovered for the rest of the day.”

He noted that one of his technical indicators had shown a little bit of potential diversion downward Thursday morning, but it never materialized. “Today’s action sort of erased that back and eliminated the possibility of having that negative bearish diversion. Depending on where you draw your lines, we are approaching, or are in overbought status. However, as anyone will tell you, the market can stay overbought for some time.

“The little tingling on the back of my neck that I had about potential weakness in gas was washed out by today’s strong showing,” he added. “I think the way futures sold-off and then recovered reinforced my comfort in being a bull.” The broker noted that he still looks to $6.65 as his upside target and $6.11 on the downside.

“Crude is clearly moving into uncharted territory,” he said. “We are in shouting distance of the old all-time high of $41.15/bbl, set just prior to the first Gulf War. In my opinion, we will probably see it sooner rather than later.”

The Energy Information Administration’s (EIA) natural gas storage report for the week ended May 7 was 1 Bcf higher than the general industry consensus of 75 Bcf. The injection continues the string of almost dead on predictions by analysts and market-watchers. Despite the fact that projections were on course, Thursday’s storage number appeared somewhat bearish when compared to the five-year average build of 69 Bcf and last year’s 64 Bcf build for the corresponding week.

The 76 Bcf injection came in on the low side of Citigroup Kyle Cooper’s 76 to 86 Bcf range. “A build in this range would continue to indicate a bearish temperature adjusted supply/demand balance,” he said on Wednesday. “This should continue to place inventories on pace to easily surpass 3,000 Bcf with levels over 3,100 Bcf also quite likely.”

Thomas Driscoll of Lehman Brothers was calling for a 65 Bcf build, while Tim Evans of IFR Energy Services was predicting a 60-70 Bcf build, even while noting that the consensus was reportedly closer to 75 Bcf.

Following the report, working gas in storage now stands at 1,303 Bcf, according to EIA estimates. Stocks increased from 391 Bcf higher than last year at this time to 403 Bcf higher. Storage continues to chip away at the five-year average deficit. Stocks now stand 21 Bcf below the five-year average of 1,324 Bcf, while a week a go they stood 27 Bcf below.

The East region led the way by injecting 44 Bcf, while the Producing region added 21 Bcf. The West region added 11 Bcf. At 1,303 Bcf, the level of working gas is within the five-year historical range, EIA noted.

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