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Daily Market Update August 21, 2020

Early Morning Update

The Sep20 natural gas contract is trading down $.04 at $2.31.  The Sep20 crude oil contract is down $0.40 at $42.42.

Summary

The prompt NG contract traded lower yesterday, finishing down $.074 to close the day at $2.352.  The EIA reported a build into storage of 43 Bcf, inline with expectations but behind the 5-year average of 56 Bcf. 

Whether the sell-off yesterday is part of a broader trend or just a pause to the recent rally.  The WSJ reported this morning that producers recognize that pricing has improved recently but still seem a little hesitant to restart production to pre-pandemic levels.  The concern is that if production rises and we get another mild winter, then prices could be depressed in 2021 again.  On the flip side, demand is recovering (higher LNG exports, very high power burns) and economic growth could resume this winter as a vaccine (hopefully!) becomes available, all during winter heating season.  So if production remains low and demand continues to increase, then prices could continue to climb as there will likely be a supply/demand mismatch. 

Index prices in Texas have fallen back this week as temps have moderated slightly, but California prices are still elevated.

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Market Settles 082020

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