After dropping to a low on the day of $6.58 in early trading, the June natural gas futures contract, in its last day as the prompt month, pulled itself back up during the afternoon to close at $6.680, down $0.004 for the day. The July contract closed at $6.732, down $0.008. About 88,586 contracts changed hands.

“[It was] probably one of the lower volume expirations we have had in a while,” said Ed Kennedy of Commercial Brokerage Corp. “The MOCs [Market on Close] orders were pretty evenly matched, mainly because the end-users don’t have anything on.” He noted that while it was a very orderly expiration, the settlement was a little higher than he expected due to the currently robust storage dynamic.

Natural gas futures continued to maintain a loose bond with crude futures, which came off a little bit further Wednesday as the July contract dropped 44 cents to close at $40.70. Kennedy pointed out that the “crude factor” is still affecting natural gas. “I can debate whether or not they should be following each other, but it really doesn’t matter. What is, is,” he said.

“I think [natural gas futures] are going to try for new highs above the highs of this week,” he said. “Then we will find out if there is any selling up there. The locals on the floor keep talking about this $6.95-7.00 area, and at some point it might just become a self-fulfilling prophecy. We will see what happens.” On the downside, Kennedy looks to $6.30 as support.

With expiration out of the way, most market-watchers have turned to the pending EIA storage report for the week ended May 21. The injection number to be released Thursday morning will go head-to-head with last year’s 95 Bcf build and the five-year average build of 76 Bcf.

Kyle Cooper of Citigroup is calling for a build between 84 and 94 Bcf. “Temperature models indicate a report almost identical to last week while actual pipeline data suggests a build quite a bit larger than last week,” he said.

“If anything, we believe our estimate to be low, rather than high,” Cooper said. “A build in this range would again indicate a rather neutral temperature adjusted supply-demand balance. Inventories remain on track to easily exceed 3,000 Bcf by the end of October.”

Tim Evans of IFR Energy Services thinks the build range will be slightly higher. “Thursday’s DOE report may show 90-100 Bcf in net injections to storage, with anything over the 76 Bcf mark taking something off the 15 Bcf year-on-five-year deficit. The emergence of a slight year-on-five-year surplus might further erode psychological support, as it makes it that much harder to argue that the current market is tight.”

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