Natural gas futures dropped lower Thursday morning as bears were rousted for the second week in a row by a larger-than-expected storage injection (57 Bcf). After falling a dime in the five minutes following the storage report, the market stabilized for the rest of the session. June futures closed at $5.267, down 11.8 cents for the day.

According to the Energy Information Administration, 57 Bcf was added to underground stocks during the week ending April 25, bringing total working gas levels up to 741 Bcf. The weekly net refill figure, which easily exceeded expectations centered on a 45 Bcf build, was immediately deemed bearish by traders and analysts. The 57 Bcf build also eclipsed both last year’s 31 Bcf injection as well as the five-year average refill of 47 Bcf. During the week ending April 18, which saw even milder temperatures, the market managed a 61 Bcf build.

The report was a shock for George Leide of New York-based Rafferty Technical Research, who noted that the 40-50 Bcf injection expectations had already taken into account the market’s propensity lately for large injections. “The analysts that run models based on degree-day data had already bumped up their expectations from 25 to 40 Bcf,” he noted.

Looking ahead, Thomas Driscoll of Lehman Brothers in New York believes that only with demand-stifling higher prices will the market reach its 3,000-3,200 Bcf storage target by November. “Recent storage data after adjusting for seasonal factors and weather imply that summer injection rates could be 0.2 Bcf/d weaker than the five-year average,” he wrote in a note to customers Thursday. “Average storage injection rates this summer would lead to Oct. 31 storage levels of only 2,500 Bcf.”

On the technical side of the market, June suffered a failure when it hit resistance in the $5.45-52 zone Wednesday. Because the downtrend line slopes at the rate of roughly 6 cents a day, resistance is seen at $5.41 Thursday, Leide said. “I look for a period of consolidation here, with a possible test back down to the $4.95-5.02 area. For the market to rebound, the charts need to repair themselves,” he continued. For that to occur, the June contract would need to trade back to about the $5.52 level.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.