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Daily Market Update January 17, 2020

Early Morning Update

The Feb20 natural gas contract is trading down $0.04 at $2.03.  The Feb20 crude oil contract is up $0.29 at $58.81.



Lots to talk about, so let’s get started.  First off, the EIA reported a larger than expected draw from storage of 109 Bcf.  Final estimates had centered on a draw in the mid-90’s, so this draw was quite a surprise.  The market briefly moved up a few cents, but the ‘rally’ would be short-lived as mid-day weather reports wrecked any chances of a sustained rally.  Weather forecasts which had previously called for colder temps up and down the east coast now are showing normal to even above-average temps.  This is a big change and pushes out the prospect of higher heating-related demand until at least early Feb now.   The longer this warm weather goes on, the greater storage will be to end winter.  And estimates for end/winter storage are currently around 1.8 Tcf, with some calling for even higher reserves.  With storage approaching, or even breeching 2.0 Tcf end/winter, it’s hard to imagine a significant price recovery for NG in the short-term.  A lot can change, but with these weather forecasts, the prospect of sub-$2.00 gas seems to be increasing.

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