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Daily Market Update June 1, 2020

Early Morning Update

The Jul20 natural gas contract is trading down $0.08 at $1.77.  The Jul20 crude oil contract is down $0.19 at $35.30.

Summary

The economic realities of the COVID pandemic made a tremendous impact on energy markets in June – steep declines in production, industrial demand, and global LNG prices created an environment where weakness became the norm. In fact, as the prompt month, June only settled above $2/MMBtu once (it traded at $2.50/MMBtu last year). Power markets across the country also saw historically low index pricing – all eastern markets & CA saw day ahead around-the-clock prices settle under $20/MWh, while ERCOT real time settled under $22/MWh. These low prices have created uncertainty, particularly around what happens when consumers return to the “new normal” for the entire energy complex. Now that state economies are reopening, how quickly does demand rebound? Do U.S. consumers just open their wallets like the pandemic never happened? How does record unemployment affect residential cooling demand this summer, particularly if it’s hot? The market sees more short-term questions than answers and is priced accordingly, where NYMEX Cal 2021 prices are elevated at $2.65, compared to the rest of the Cal 22–25 strips, which are all trading under $2.50.

Market Update060120

Market Settles 052920

 

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