Breaking the string of triple-digit weekly storage refills at four, the Energy Information Administration (EIA) Thursday morning announced a 97 Bcf injection for the week ending June 27. Natural gas futures prices, which were already in the process of a cautious short-covering rally, used the smaller-than-expected refill as a springboard to higher levels. But after a quick spike to an intra-day high at $5.36, the August contract was hit with a steady barrage of selling late Thursday morning and early afternoon. August closed mixed at $5.226, 2.7 cents higher in Thursday’s holiday-abbreviated trading session.

According to the EIA, underground storage increased to 1,662 Bcf the prior week. While the injection figure exceeded the year-ago refill of 68 Bcf, as well as the five-year average build of 76 Bcf, it fell short of the 2001 comparable increase of 100 Bcf. Most importantly, the most recent report’s 97 Bcf injection came in at the low end of the 97-114 Bcf range of expectations.

Stocks are now 624 Bcf less than last year at this time and 348 Bcf below the five-year average of 2,010 Bcf. In the East Region, stocks were 196 Bcf below the five-year average following net injections of 60 Bcf. Stocks in the Producing Region were 152 Bcf below the five-year average of 633 Bcf after a net injection of 28 Bcf. Stocks in the West Region were 1 Bcf below the five-year average after a net addition of 9 Bcf.

For George Leide of Rafferty Technical Research in New York, the 97 Bcf refill was definitely on the low side. “The market was quick to react. We popped up to $5.36 in a hurry,” said Leide, who noted that the market had been creeping higher even before the 10:30 a.m. EDT release. “People were anticipating a short-covering rally [Thursday]. There was a vacuum of sell orders when the number came out. The market had little resistance to the upside.”

However, what goes up must come down and that was certainly true of futures Thursday. By 10:45, the August contract was probing the downside at $5.185, 17.5 cents less than its spike high 10 minutes earlier.

For Leide, Thursday’s $5.226 close was mixed. A settlement below $5.20 would have confirmed the bottoming pattern and a move down toward the $5.00 mark would have been likely this week; a close above $5.25 could have given bulls the courage they need to make another attempt at resistance at $5.47, he reasoned.

Craig Coberly of GSC Energy is also ambivalent over this market, which last week dipped below, but settled above, key technical support at $5.11. “From an Elliott Wave perspective, the declining pattern from the June 6 high to [Wednesday’s] low counts as an almost perfect ‘abc’ corrective pattern,” he wrote in a note to customers Thursday. “This implies the subsequent move should be higher. Not necessarily the start of the major bull move, but at least higher.”

Another dynamic that traders need to be aware of this week is how the market reacts to the announcement last Wednesday by the National Oceanic and Atmospheric Administration that its heating degree day data was understated this past winter. In its weekly and monthly HDD [heating degree day] releases since last July, NOAA had reported that the Mid-Atlantic states were experiencing an only slightly colder than normal winter (4%) while New England temperatures were just about normal (0.7% colder). For many market-watchers suffering through what seemed like a brutal winter in places like New York, Boston and Washington, DC, this data seemed incongruent.

As it turns out, it was. According to corrected data released Wednesday by the NOAA, New England was 8.5% colder than normal last winter while the Mid-Atlantic was 6.3% colder than normal. “There was an error in calculating the climate division temperatures that were used to compute the population weighted state, regional, and national degree days. This affected the heating degree days since July 2002 and cooling degree days since January 2003,” according to a note posted on the NOAA website Wednesday.

For Thomas Driscoll of Lehman Brothers in New York, the error helps to explain the large storage draws this past winter. “[Wednesday’s] announcement by NOAA that it was 5% colder (Nov-March) than first thought leads us to conclude that last winter’s ‘weather normalized’ storage withdrawal totals were about 200 Bcf greater than the five-year averages,” he wrote in a note to clients Thursday. “This implies that the industry should target ‘high-normal’ (roughly 3,100 Bcf) working gas levels going into winter.”

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