For the second week in a row, natural gas futures shrugged off an undeniably bearish storage report. After dipping to $6.25 in the moments following the report of a record-setting 114 Bcf weekly storage injection, the July contract rebounded Thursday afternoon amid waves of short covering and speculative buying. The contract notched its highest close ever at $6.521, up 14.6 cents for the session and within striking distance of Wednesday’s $6.61 top.

According to the Energy Information Administration, U.S. gas storage levels increased 114 Bcf to 1,199 Bcf during the week ending May 30. Stocks were 755 Bcf less than the same time last year and 484 Bcf below the five-year average of 1,683 Bcf. In the East Region, stocks were 260 Bcf below the five-year average following net injections of 70 Bcf. Stocks in the Producing Region were 214 Bcf below the five-year average of 558 Bcf after a net injection of 34 Bcf. Stocks in the West Region were 10 Bcf below the five-year average after a net addition of 10 Bcf.

Versus expectations centered on a 100-120 Bcf refill and last year’s 107 Bcf injection, the storage build was modestly bearish. However, compared to the five-year average addition of 90 Bcf for last week, the 114 Bcf figure was definitely price-negative. Last week the market rallied when the EIA reported a larger-than-expected 95 Bcf refill. Breaking the previous record of 111 Bcf set in July 1995, the 114 Bcf injection is the largest in the nearly 10-year history of EIA storage data.

Having calculated weather-normalized injection rates over the last four weeks to be 2.8 Bcf/d stronger than the five-year average, Thomas Driscoll of Lehman Brothers in New York believes that given normal weather, storage stocks will reach roughly the 2,890 Bcf mark by Oct. 31.

Dissecting the storage pie slightly differently, Kyle Cooper of Citigroup in Houston calculates that storage injections over the past four weeks have averaged 25 Bcf (3.6 Bcf/d) above the historical regression. “If this persists through the balance of the injection season and temperatures match the five-year average, then storage levels would rise to 3,035 Bcf,” he wrote in a note to customers Thursday.

George Leide of New York-based Rafferty Technical Research agrees that Thursday’s storage figure was a bit of a surprise. To make up for that bearishness, Leide believes the market needs some support in the form of summer weather forecasts. “It is just too early for this thing to take off. Until we get some weather, I can’t see July breaking above $7.00,” he said.

The technical side of the market also is waffling a little bit, Leide continued, pointing to the 40-cent decline Wednesday following the July contract notching a new all-time high at $6.61. “We are making higher highs and higher lows, which is supportive, but the rallies are lacking something. I guess you could say that we have some willing sellers, and some more willing buyers out there.”

Several market watchers polled by NGI Wednesday vouched for the presence of producer selling when prices moved above the $6.50 level. After notching a $6.61 high Wednesday morning, the market dropped 34 cents in roughly an hour. But while Wednesday’s session closed on a sour note at $6.375, Thursday’s settle was constructive because it was above prior resistance at $6.52. On the upside, resistance now exists at $6.61.

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