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U.S. Oil Prices Rebound, But For How Long?

The NYMEX natural gas market dropped quite a bit this week. Forecasts of warm weather for the coming weeks, an above-normal-temperature for the winter, and a weekly storage report with a very low withdrawal of 1 Bcf drove prices down. The January 2021 natural gas contract fell 10 cents yesterday, another 16 cents this morning, and then dropped further during the day and is currently trading at $2.53/MMBtu.

Oil prices are rebounding compared to their dip below zero in the spring. This makes sense because U.S. oil prices rose 27 % in November. Coronavirus vaccine breakthroughs are creating hope for a return in demand for gasoline and jet fuel but there are indications of another nationwide shut down in the near future and it could quickly affect the oil industry once more. The January 2021 crude oil contract is down $0.03 at $45.25.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production would not be able to keep up with demand due to LNG and Mexican exports.