SMC Weekly Summary
Summary for Week beginning 11/15/20
In our report dated Nov. 8, from a seasonal standpoint, we considered that our first pre-winter seasonal recovery phase had topped out at $3.396, on October 30, and that our anticipated November pullback phase had become operational with a very sharp drop to as low as $2.866. Looking forward, we looked for mild temperature forecasts to be conducive to more downside but pointed to a tight supply/demand that would limit its magnitude.
This week, temperature forecasts were still mild looking, and the market opened about $0.02 lower than where it left off at $2.872, falling immediately another $0.05 to the low of the week at $2.821 Sunday evening. With the market looking like the mild November temperatures had taken it about as low as it could for now, the market began to put in some upwardly biased consolidation that raised it to as high as $3.087 before the Friday storage report, which showed a build that came in bearishly 11 Bcfs above expectations. The market softened to close the week at $2.995.
Factors Affecting the Market
- Supportive: supply/demand balance; seasonal forces
- Neutral: oil; tech considerations
- Negative: storage; cash; weather
We are now in the October-December pre-winter season, when the seasonal tendency is for wavelike recovery movement. One of the more reliable seasonal moves is a November pullback phase with the timing, duration and magnitude affected by storage levels, the supply/demand balance, cash pricing, and especially, temperature forecasts. We are currently in that phase, having progressed about $0.57 from $2.396 to as low as $2.821 on Monday, November 9. It tried to mount a recovery from there, but with temperature forecasts in the 6-10, 8-14, and 15-28 day time frames still looking very mild, cash pricing showing some weakness, and a noticeable bearish shift in the supply/demand balance, the door may still be open for a little more downside in our pullback phase. Basically, there has been no sign yet of the kind of bullish weather pattern that would usually jump start a second recovery phase. So, unless we spot some bullish shifts in these fundamentals as we start another week, we are inclined to look for the November pullback to try to resume in the coming week and continue somewhat further.
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