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Daily Market Update November 16, 2020

Early Morning Update

The Dec20 natural gas contract is trading down $0.15 at $2.85. The Dec20 crude oil contract is up $1.72 at $41.85.

Summary

As gas storage turns from injections to withdrawals, one of the fundamentals on which the market has a close eye is the end-of-winter (EOW) storage level. With uncertainty surrounding lower year-over-year production, La Nina-influenced winter weather, and the current economic reality of COVID, this key indicator is more unpredictable than usual. For the five-year averages, the withdraw start is 3.76 Tcf, winter withdraw is 1.98 Tcf, and EOW storage is 1.78 Tcf. Within the averages, there are strong outliers within the past seven years, as withdraws have been as large as 3.0 Tcf (Winter 13/14) and as small as 1.5 Tcf (Winter 15/16). For this winter, storage is starting at 3.95 Tcf, and EOW estimates vary from 1.93 Tcf to 0.63 Tcf, depending on how cold it gets. The takeaway is that, even with a winter like last year, storage will be well below the EOW 5YA, and, if a strong winter comes to fruition, the market may see its lowest EOW storage level in the past decade. With pressure on drillers when prices are below $3.00, the majority of EOW storage projections show that production needs to increase, and with Cals ‘22-’30 prices all below $2.80, something has to give. How cold this winter gets will likely be the defining factor where long-term pricing goes.

Market Update 11 16 20

Market Settles 11 13 20

 

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