Seeing its first action as the prompt month, the June natural gas futures contract took another shot at the psychologically important $6 level following the Energy Information Administration’s (EIA) report of a 78 Bcf weekly gas storage injection for the week ended April 23.

After closing at $5.966 on Wednesday, the June contract slipped in Access trading to trade down to $5.850 just prior to the 10:30 a.m. (ET) storage release. Following the report, June quickly reversed higher to notch its $5.99 high on the day at 11:35 a.m. (ET) and again at 11:53 a.m., before receding back to close at $5.924, down 4.2 cents on the day.

Besides the “fireworks” right after the storage report was released, Thursday’s session on the whole was “pretty dull,” with the prompt month only making small moves back and forth the rest of the afternoon, said Tom Saal of Commercial Brokerage in Miami.

Despite what appeared to many as a bearish report, Saal pointed out that “people were expecting a build between 70-80 Bcf, and they got one.” After the initial run-up following the report, Saal said that “there was a follow through by funds and locals trying to push [June] over $6. I heard some trade stops went up into the low nineties as well.”

The build came in almost right in the middle of Citigroup analyst Kyle Cooper’s range of 74-84 Bcf. However, the 78 Bcf injection came in near the top side of IFR Energy Services analyst Tim Evans’ prediction of a 60-80 Bcf build, and slightly outpaced the industry consensus of a 71-77 Bcf build. Many market-watchers found the report to be bearish when compared to the 46 Bcf five-year average build for the week as well as the 52 Bcf net injection from a year ago.

Offering one opinion on the lofty size of the injection, Lehman Brothers’ Thomas Driscoll, said, “The weather has been 5.1% warmer than the 30-year normal so far this season (i.e. fewer HDDs), and this warm weather has depressed demand by about 330-335 Bcf.” Continuing the trend, Driscoll noted that the National Oceanic and Atmospheric Administration forecasts 20% warmer than normal temperatures over the next week.

The EIA reported that there was 1,155 Bcf of working gas in storage as of April 23, with stocks sitting 401 Bcf higher than at the same time last year and 34 Bcf below the five-year average of 1,189 Bcf. The East region made the largest contribution, injecting 48 Bcf for the week. The East region’s stocks are now 41 Bcf below the five-year average. Inventories in the Producing region were 31 Bcf above the five-year average of 418 Bcf after a net injection of 26 Bcf, while stocks in the West region were 24 Bcf below the five-year average after a net addition of 4 Bcf. The EIA noted that at 1,155 Bcf, total working gas is currently within the five-year historical range.

“I am pretty confident that we will fill storage,” Saal said. “We did last year under a lot worse circumstances than we are faced with right now. The problem we’ve got now is that buyers are having to hold their nose when they buy natural gas.”

UBS analyst Ronald Barone said that based on current storage balances, his calculations suggest that the industry will require an injection pace of 10.4 Bcf/d — versus 10.5 Bcf/d in the prior week — to get supplies to “a very solid comfort level” of 3,150 Bcf by Nov. 1. “We view this as relatively bearish when compared with the 12.6 Bcf/d actual injection rate last year (particularly after considering comparably improved hydro conditions this year — though still below normal), but relatively bullish when compared with the 9.8 Bcf/d actual 10-year average,” he said.

Commenting on Nymex and ICAP’s plan, unveiled Wednesday (see Daily GPI, April 29), to roll out an electronic market in options on oil and natural gas inventory statistics, Saal said it will be interesting to see the level of participation.

“It is kind of like a secondary derivative of the natural gas price, meaning that you’re hedging an adverse price move resulting from an EIA number,” Saal said. “However, even if you were to guess the right number, you might not guess the right price move. It is going to be difficult for hedgers who work in large organizations to justify to their management about participation, at least initially.”

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