Coming in lower than most industry projections, the Energy Information Administration (EIA) reported Thursday morning that 19 Bcf was added to underground storage for the week ended April 7. Working from the smaller than expected injection, strength in the petroleum markets and thin volumes due to Passover, May natural gas futures pushed higher on Thursday to finish the week at $7.135, up 32.7 cents on the day and 39.2 cents higher than the close of the previous week.
Just prior to the report’s release, May natural gas futures were trading at $6.670. However, immediately following the report, the prompt month jumped 15 cents to trade at $6.820. After breaking above $7 for good just after 12:30 p.m. EDT, the contract reached a high of $7.150 late in the session before closing.
Petroleum futures continued to lend a supporting hand as tensions with Iran keep the complex walking on eggshells. May crude settled 70 cents higher Thursday at $69.32/bbl. Heating oil and unleaded gasoline made small gains as well.
“I don’t know how much the move in crude had to do with the rise in natural gas,” said Brad Florer, a broker with ICAP Energy. “I think natural gas was leading crude much of the day. The thing that could have impacted natural gas was the fear in crude of what could happen over the weekend regarding Iran.”
As for natural gas, Florer said he believed that “the market was really thin on the Nymex floor. It was definitely thin in over-the-counter trading. I think a lot of people were out for Passover.”
He said bears are likely questioning if there is anything left to the downside to expose after the market has been moving sideways for so long. “I think some of Thursday’s move higher was bears seeing this fact and concerning themselves with the potential upside,” Florer said. “There were probably some shorts taking some off of the table ahead of the weekend. There were also probably some of the more aggressive bulls seeing a thin market and deciding to stick something nice on the chart, so they came in and bought it. When people pick up their charts Monday morning they are going to see a key reversal on there and maybe it will force the momentum on the upside.
“If you are a bull, Thursday’s action bodes well for you,” he continued. “It really was a key reversal on the chart. It looked good for the longs, especially with summer peaking around the corner.”
Despite the bullish mood, Florer said the market is still stuck in its recent range from $6.65 to $7.65. “The bottom line is, Thursday’s move doesn’t mean anything yet, but for the first time in a while there are people talking about a bottom being in place.”
Commercial Brokerage Corp.’s Tom Saal said he was caught a little bit off guard by the storage number’s impact on natural gas futures. “I am a little surprised that the market reacted as much as it did to that number,” he said. “It was the first injection of the season and a lot of the private consulting companies were looking for a build in the high 30s. A lot of people were expecting big injections and we obviously did not get one.”
As for the long-term ramifications, Saal said, “I want to see a couple more weeks of reports before we can draw any serious conclusions.”
According to a Reuters survey of 25 industry players, an average of 27 Bcf was expected to be injected into underground stores for the week. The ICAP derivatives auction revealed a consensus injection of 31.4 Bcf. The 19 Bcf injection was larger than the five-year average injection of 8 Bcf, but it was much smaller than last year’s 39 Bcf injection.
As of April 7, working gas in storage stood at 1,714 Bcf, according to EIA estimates. Stocks were 427 Bcf higher than the same time last year and 665 Bcf above the five-year average of 1,049 Bcf. The East and Producing regions led the charge with injections of 9 Bcf and 8 Bcf, respectively, while the West region chipped in 2 Bcf for the week.
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