June natural gas futures carved out a modest advance Thursday after the release of government inventory data showed increases less than what the market was expecting.

The supportive inventory report was enough to send June futures to a closing gain of 5.5 cents to $4.339 and July futures also enjoyed an advance of 5.5 cents to $4.440. June crude oil skidded $1.25 to $74.40/bbl.

The morning release by the Energy Information Administration (EIA) of inventory levels was anticipated to show a build of 102 Bcf, according to a Bloomberg survey, and an increase of 100 Bcf if Houston-based IAF Advisors was correct. The actual figure came in at 94 Bcf and immediately after the 10:30 a.m. EDT release of the numbers bulls lost no time sending prices higher. Just four minutes after the figures were released, June futures had jumped more than 11 cents to $4.396.

Traders were not terribly impressed. “We have been here before,” said John Woods, a senior trader at McNamara Options LLC in New York. He added that he thought there were stop-loss orders in the market above $4.43 and if these were triggered by still higher prices, it could launch a round of short-covering.

Natural gas showed its signature volatility. Just one minute before the figures were released, June futures traded down to $4.154, down 13 cents on the day, but the bullish figures forced sellers to rapidly reverse course. “That’s what you get for putting your orders on a computer,” said Woods, who noted that traders will at times place orders to be executed by computers when certain prices and or market conditions exist, bypassing any human judgment.

Recent gains in June futures have given some hope to the bulls, but if the observation of one money manager is correct, the recent natural gas price advances have been the result of forces removed from the fundamental supply-demand balance. A Texas money manager suggested that the recent large moves in other markets have caused portfolio adjustments by funds.

“Let’s say a fund has a big move and decides it needs to pare down its volatility by 3%. Whatever positions it has are now being liquidated by 3% and the positions they have in natural gas are being impacted,” he said.

In his view, the portfolio managers have adjusted natural gas holdings to reset the beta, the ratio at which the value of the portfolio moves relative to the market, and that has been reflected in recent natural gas moves. “Natural gas prices can get whipped around outside of its recent $3.80-4.20 trading range pretty easily.

“I think that is what is going on, and I don’t think anything has changed substantially for prices to be out of that range except for these portfolio adjustments.”

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