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Daily Market Update November 6, 2020

Early Morning Update

The Dec20 natural gas contract is trading down $0.02 at $2.92.  The Dec20 crude oil contract is down $0.69 at $38.10. 

Summary

Despite a relatively large storage withdrawal reported by the U.S. Energy Information Administration yesterday and natural gas production dipping 1.4 Bcf/d from levels seen earlier this week, warm weather forecasts have put significant downward pressure on gas prices, with the Dec ’20 contract falling below $3.00 for the first time since its prompt month debut. The prompt month has fallen 41 cents (12%) this week, settling at $2.942/MMBu yesterday, while the 2021 calendar strip tumbled 18 cents (6%), settling at $2.967/MMBtu. The EIA reported a 36 Bcf decline in storage stockpiles for the week to Oct 30, which was larger than the 31 Bcf pull the market had anticipated, and was very bullish compared to the 49 Bcf build seen last year for the same week, as well as the 52 Bcf five-year average injection. However, it is expected that draws from storage in the coming weeks will flip back to injections before the withdrawal season begins in earnest. Although the mild weather outlooks are keeping prices in check now, production momentum flattened by low crude oil prices and increases in heating demand and LNG exports over the next two months should bring upward pressure to natural gas prices.

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