After absorbing the news that a larger-than-expected 93 Bcf had been added to underground natural gas storage last week, June natural gas futures tumbled lower after 1 p.m. EDT Thursday as fund selling entered the fray. After notching a new, three-month low of $6.03 just before 2 p.m. EDT, the expiring contract rebounded modestly at the close. It finished at $6.123, down 19.2 cents for the day and nearly 70 cents below the price level from which it began its tenure as prompt month.

Taking over as the new prompt contract, July natural gas on Thursday shared in the freefall, reaching a low of $6.13 before settling at $6.212, down 16 cents.

The frenzy of activity over the last 90 minutes of trading in June futures had market participants on their toes Thursday afternoon. “What we saw at the end there Thursday was fund-selling,” said Tom Saal of Commercial Brokerage Corp. in Miami. “It was fund-selling and some long liquidation, but the fund-selling helped push the front contract down to $6.03 and then you saw the buying over the last half hour.”

The trend has been down, Saal said, noting that noncommercial traders were net short over 35,000 contracts as of May 17. “The funds were very short, but not as short as they can be,” he said. “It really looked like the market was pedaling sideways and then all of the sudden the funds came in and sold [Thursday], so there must have been certain prices that triggered them to do more selling.”

Now with attention turned to July, the question becomes whether the momentum lower will continue. Prior to the afternoon action, Advest Inc.’s Jay Levine said that the next area of support basis July would be the $6.25 area followed by $6.10. “Taking out $6.10 leads me to believe you’ll see sub-$6 down to $5.95, then another 20 cents and something closer to, if not slightly below, $5.75,” he said. “If we can’t begin trading back over $6.40/$6.45 basis July anyway, and preferably soon, I have those outside preliminary technical counts down to the $5 area.” On the upside, Levine said he sees initial resistance closer to $6.50/$6.55 then another 25-30 cents into the $6.75/$6.80 area.

Despite the slide in natural gas, petroleum futures remained positive for most of Thursday. July crude ended the day up three pennies at $51.01/bbl, while June heating oil increased 1.99 cents to close at $1.4483/gallon. June unleaded gasoline settled down less than a cent at $1.4478/gallon.

Coming in a little above expectations and historical comparisons, the 93 Bcf injection reported Thursday by the Energy Information Administration (EIA) for the week ended May 20 did nothing to support the already weak natural gas futures complex.

According to the Reuters survey of 18 industry players, natural gas storage levels were expected to increase by 90 Bcf. The ICAP-Nymex storage options auction, which runs from 3-4 p.m. EDT on Wednesday, revealed a consensus forecast of an 88.9 Bcf injection. The 93 Bcf injection was slightly larger than last year’s 88 Bcf build, but significantly larger than the five-year average build of 81 Bcf.

Working gas in storage now stands at 1,692 Bcf, according to EIA estimates. Stocks are now 228 Bcf higher than last year at this time and 303 Bcf above the five-year average of 1,389 Bcf.

The East region led the build with an injection of 60 Bcf, while the Producing and West regions chipped in 19 Bcf and 14 Bcf, respectively.

Looking ahead to the Memorial Day holiday weekend schedule, the energy markets on the New York Mercantile Exchange will close at 1 p.m. EDT on Friday (May 27) and will be closed for Access trading over the weekend and during the regular session Monday (May 30).

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