SMC Weekly Summary

Summary of Week Ending 11/29/2020

 

In our last report dated 11/22/20, we noted that October-December seasonal movement was playing out very consistently with our expectations this year and that our ongoing November pullback phase had continued significantly into a low point of $2.525 on November 19. Looking forward, we cited seasonal timing and technical considerations and offered our opinion that the $2.50 area was very likely to hold. Therefore, we looked for the November pullback phase to end and for some degree of our anticipated second pre-winter recovery phase to get underway. We said that the tendency was for December weather to determine whether second pre-winter recovery phases are enduring or brief.

 

In our last report dated 11/22/20, we noted that October-December seasonal movement was playing out very consistently with our expectations this year and that our ongoing November pullback phase had continued significantly into a low point of $2.525 on November 19. Looking forward, we cited seasonal timing and technical considerations and offered our opinion that the $2.50 area was very likely to hold. Therefore, we looked for the November pullback phase to end and for some degree of our anticipated second pre-winter recovery phase to get underway. We said that the tendency was for December weather to determine whether second pre-winter recovery phases are enduring or brief.

As to how the week ending 11/27/20 turned out, temperature forecasts shifted bullishly from mild to more normal for the first half of December. As such, the market opened the week about .06 cents higher at $2.705 and headed as high as $2.963 on Thursday evening. Then, with cash still looking weak and temperature forecasts hinting for milder weather again after mid month, the market fell back .12 cents to close the week at $2.843. From a seasonal standpoint, we were on course, as it appears that our November pullback phase concluded at $2.525 on November 19 and our anticipated second pre-winter recovery phase has become operational.

Factor Summary

  • Supportive: supply/demand balance; seasonal forces
  • Neutral: weather; oil; tech considerations
  • Negative: storage; cash

Conclusion

We now view the second pre-winter recovery phase as operational. We consider the forecast switch to more seasonably cold weather for the first 2-weeks of December to be the driving force of what has been a healthy .44 cents in upward progress. We attribute the pullback on Friday to what has been weak cash pricing and to the improvement in the year-over-year storage surplus. Looking ahead, unless temperature forecasts start picking up something colder or can extend the moderately cool outlook beyond mid-month, we consider it possible that last Thursday’s $2.963 will stand as the high water mark of our second pre-winter recovery phase.

For questions or comments, please feel free to call SMC at 501-240-6700. We are also happy to provide interested hedging and speculative entities with a trial of our full body of work.

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