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Video new as of 7.31.2020.
Energy markets over the past two weeks have been volatile and stagnant at the same time. We can say this because day over day, the market made moves higher and lower. From July 10 through July 24, the prompt month August 2020 natural gas futures market moved a grand total of 0.3 cents from $1.805 to $1.808.
However, within that period, the prompt month spent minimal time in the $1.80s and in fact spent far more time in the $1.60s. Its lowest settlement over the two weeks came on July 20th when it sunk down to $1.641. That level proved unsustainable for now as the market quickly rebounded over four days to $1.808, even with moderate weather forecasts for the early part of August.
One of the bullish factors driving prices higher is that storage reports are starting to feel the pain of the oppressive July heat. Each week throughout July has featured a consistently lower injection than the week prior. With injections of 56, 45, 37 and 26 BCF, total injections in July have summed to just 164 BCF. The middle of June saw a single week with a 120 BCF injection and last July netted 250 BCF on injections. The big picture impact to storage is still relatively small given the surplus that exists, but in the moment, the weekly reports are potentially adding fuel to the bulls.
Perhaps more impactful over the past two weeks is the trading action further out in future years. We noted in our last commentary that outer years seem to be turning more bullish and the past two weeks have seen that momentum continue. While the prompt month was virtually unchanged over the two-week timeframe from July 10 through July 24, the 5-year strip average gained 5.6 cents. Looking at that in calendar years, 2021 gained 3.3 cents, 2022 tacked on 4 cents, 2023 increased 6 cents and 2024 added 8.1 cents.
Focusing on 2024, it finished on July 24 at $2.507. One month prior on June 24, it settled at $2.355, more than 15 cents lower. That means over the course of just one month, 2024 prices have risen 6.5%. For more than 3 months prior to June 24, dating all the way back to before COVID shut down the country, that 2024 average never traded outside the recent trading range from the past month. Translating that to simpler terms, we are seeing far more bullishness now in outer year pricing than we have in a long time. Prices are still at very attractive long-term levels, but there is clearly volatility now in play for outer years, which emphasizes the importance of managing spend and budget now for future years.
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