Morning Update Feb 26, 2020

I’m am short on time, gotta load a new program into some equipment and test while they run product, barf. I’m always torn on doing that. It’s exciting and fast, but stressful.

I’m also torn on Natgas. I stay long, thinking about adding to my position again. fundamentals are holding steady. The coronavirus is waning in the news each few days until something new pops up. Yesterday it was the CDC stating that it’s coming. Well no shit it’s coming. Even with these little surprises in the media, everything is really progressing as usual.

NG1 on 1 hr chart at Tradingview.com

The chart looks to have held and is turning. We know NG is full of surprises. I am still going to just hold what I have in UNG. I can be happy with a gain on 50% of my holding in UNG.

They are calling my name. Gotta go. I’ll hold this 50% of funds in UNG for a while if the market turns around. And if it doesn’t, I will not be out any extra. If the coronavirus is going to cause major damage, it will take a while to show up (the damaging effects that is). Good Luck

Oldinvestor

extra note: I may try a short VIX trade soon with say 5% of my funds, but I’m being patient for that trade. In this account, the trade will be made by buying SVXY.

Morning Update Feb 25, 2020

Boy… That looks tempting

VXJ20-VXK20 YoY comparison to past 10 years at Spreadcharts.com

I think I’ll buy a little SVXY, and short a little less TVIX to compare the two. I plan to wait to short VX spreads. I’m still nervous about coronavirus COVID-19. Here is an article that puts it more in perspective for me;

“The new coronavirus has killed nearly 3 times as many people in 8 weeks as SARS did in 8 months. Here’s how the 2 outbreaks compare.”

Also, I’m reading that South Korea is not restricting residents from venturing out. I think they see that they can’t stop COVID-19 from spreading. I know if the spread makes it to where I live, I will venture out as little as possible.

Ok, on with Natgas. Not much as changed in the last few days. LNG is still being exported at a consistent rate at or above average. Total supply/demand is holding steady. I was under the impression that storage would not catch up to the 5 year average. Right now, it appears I was reading the numbers wrong last week or so? There is a slight chance storage could meet the 5 year average by the end of the withdrawal period. I can actually see where NG might trade in a range for a short time, as long as LNG does not crash the party.

I’m going to leave it at that, I’m late on the post and must get to work. I’ll keep holding UNG with 50% of my funds. Good Luck

Oldinvestor

Morning Update Feb 24, 2020

Oil and Gas and the rest of the world are down this morning. Fear is very much the driver of this market. Italy is now under the coronavirus spotlight. It appears the virus can spread quickly and does pose a greater threat to life than “The Flu”. This is certainly reason enough to try and contain the virus, but it seems it’s going to get out regardless. It spreads too easily. One reason that just occurred to me, in order to prevent mass panic and such, is to slow down the spread. If the entire global healthcare community is overwhelmed at the same time, this would mean global panic. Even if the virus spreads, as long as it is slowed, hospitals and healthcare workers can continue to do their jobs without the panic.

As for other factors. Fundamentally, the market is the same as it has been, on track for production to slowly decline, demand is holding its seasonal pattern with no real disruptions. Weather is stupid and only influences the market withing a certain range anyway, with the exception of a blizzard when storage is already unseasonably low. That isn’t going to happen any time soon. Outside of potential LNG disruptions and virus outbreaks, the market should hold where it is. Unfortunately, I believe there will be more of both coming. I am not so worried that I am holding UNG, but that I am out of sync with the market movements because of this new layer of complexity.

That’s really all I have to say this morning. I’m not worried, but maybe a bit bummed. There is going to be a swing, there always was going to be a swing… Only now, I don’t know how to time it. What makes sense to me now is to keep my position smaller than I was expecting. I’ll hold with 50% of funds in UNG and not expect a lot, just try an manage potential risks. My plan before this virus issue was to be all-in UNG about now and playing UGAZ back and forth some while natgas moved around in each range. I’m not a fan of moving UNG in an out of the market like UGAZ, it just doesn’t make enough with the smaller % of funds dedicated.

Again, I’ll be holding on to my 50% of funds invested in UNG, I am still waiting for a fresh opportunity to add or reduce. I’m all but certain the wait will be longer than I was ever planning to reduce. That being said, I should also wait longer to add to my position as well… I may run out of ways to talk about this market, but I’ll still be here, doing my best. Good Luck

Oldinvestor

Morning Update Feb 20, 2020

Well the power just went out for the entire plant….

Weather changes have been less volatile lately; also there is a good chance the forecasted cold spell will come to be this time. For the most part, this cold is already priced in. There really isn’t much more to say about it. Cold will help, but production has got to continue to decline and LNG has got to hang in there.

Monthly NG demand by Power burn at RonHenergy.com

I think my favorite Demand factor has been power burn, not because I’m an electrical guy. Power burn has provided consistent growth to NG demand every year far longer than LNG, and can be pretty well relied on. I always thought SWN or CHK should start a power plant in central Arkansas when the Fayetteville shale was booming. Now that gas is cheap and they can’t sell it, they could just supply it to their own power plants. Seems easy to me.

Speaking of power, it will most likely be restored soon, and I will busy as all hell. I’m going continue to hold my 75% of funds in UNG to reduced to 50% at $15.71. If prices turn back and fall from here, I’ll wait to add to my position. Probably closer to $14. Good luck today, EIA at 10:30 eastern time. HFI expected draw of 160.

Oldinvestor

Morning Update Feb 19, 2020

Production is falling, and this time it can’t be saved by increases in efficiency. In 2016, NG wells produced less at the end of the year than at the beginning. Since then, in the years leading up to now production has grown about as fast as it ever has. I don’t have all the data, and I’ve preached this before; much of these gains came from a major boost in well efficiency increases. Using more sand, less water, the right type of sand, the pressures used, the way the slurry is mixed, the number of stages per well. Fracking technology has come a long way since even I was in the field. Improvements will continue, but most likely not at the rate we’ve already experienced.

There has also been demand growth unlike ever before, with major expansions of exports and NG fueled electric power generating. Before 2016, LNG exports were non-existent. Now, they are near 10% of all NG demand, and still growing.

So both supply and demand are going to slow soon, and LNG may even go backward in consumption for a bit. No doubt global import facilities will pop up at the current prices, but at what rate, I don’t know. I’ve always liked Natgas more than Oil for one main reason. It has been easier for me to keep track of from day to day because the news of natgas has always been contained within the United States. LNG exports made things exciting on the front end, because the world needed LNG far more than the US had to give. Now that is changing, and with LNG, US supplied Natgas is now on the global stage. This may not be such a huge deal, but it is another dynamic that must be tracked in order to be successful at trading. As for now, watching feed-gas to LNG exports facilities may be enough. To have an edge, one needs to know where that gas is going and what the demand situation is like in the world before it slows down at an export facility in the US. It would be nice to know global supply and demand capacities to gauge what is going on. Of course this leads to global news, much the same as Oil. This leads to much more reading that I may have time for…

Anyway, back at home, in the US. Production is falling.

EIA Drilling Productivity Report, Production by region

The EIA is expecting almost every major region of NG gas production to decrease except Haynesville and Permian. This will be the first time in quite a while, the EIA has projected a fall in overall production. Possibly Oct 2016?

It’s time to go long. I’ll worry about LNG exports when the rest of the market shows concern. Most of the expected weakness in LNG exports may already priced in, meaning the price may not drop much further, even if LNG does stall out some. There is still plenty of countries taking LNG, and plenty of countries who have now decided to cut back on expansion plans for LNG exports.

It’s time to turn perma-bull and have confidence again in my trade. That being said, there is still a need to be cautious of dips. But I believe if the lowest low is not already behind us, it will be very soon.

I’m going to remove my stop on UNG, I’ll be holding my 75% fund in UNG. I will only reduce to 50% funds when UNG gets to $15.71. I will get back on my path of buying the dips and selling only at new highs. They will be coming soon enough. Patience.

Oldinvestor

Morning Update Feb 18, 2020

Holding strong. I’m paranoid as usual, but holding. Weather forecasts are still gifting us with one cold spell that is certain to happen. There is another cold spell that is being predicted. If the second cold spell follows through, this will change storage numbers in a significant way. Not enough to match the 5 year average, but maybe enough to play catch up a little.

Short positioning still seems to be the hot topic, especially since prices have bucked the trend.

managed money positioning at RonHenergy.com

I am not sure if I have mentioned in here, but I have been thinking about this. It is not necessarily the long positions wanting to bid up the price that will cause a big price move. For a while now, I’ve believe it is the short positions that will have to start covering to cause the price to really move back to say $2.5. This idea of capitulation is not a new one of course. It is well known; I believe it has just sunk in for me.

Something else that has sunk in is the coronavirus. The market does not care about it or the effects it is having on China. At least not until there is evidence that LNG is going to be adversely affected. I made a mistake by reducing early, one I’ll do my best not to do again. LNG may have trouble in the near futures, but my current position is flexible enough to deal with that.

As for my position. I believe I’ll place a stop on 33% of my position; this would be roughly 25% of my funds. Stop price will be $14.66. I want to stop out if NGJ20 is going to move below $1.90. This may be a bit low, but that would seem to be a clear reversal to me. I will also reduce back to 50% holdings if UNG gets to $15.71. $15.71 is my adjusted average based on the sheet I need to get published. It seems this target could be reached today. Good Luck

Oldinvestor

Morning Update Feb 17, 2020

Though the stock market is closed today, NG futures are still trading. Looks like with some cold being added to the forecast over the weekend, prices opened noticeably higher. The market is still not concerned about the coronavirus, at least not to a point it is a topic of serious discussion. It is possible the market has already priced in the idea that the US has flooded the global LNG market. Or it is possible the market just doesn’t care about a slow down in LNG exports until it happens. I’m sticking with the last idea.

The chart has shown RSI divergence of a while now, and has confirmed a break away from the down trend.

NG1 on Daily chart at Tradingview.com

Sometimes I have trouble posting a clear picture as to my reasons for taking or holding off on a trade. Right now I’m holding off on the long side, or rather, I didn’t take on more of a long position on the last dip. A move that cost me. My reason for caution right now is based on the LNG market possibly being oversupplied. When LNG exports took off like a rocket, it was seen as the savior to any oversupply in the NG market. Now the LNG market may get backed up some, and LNG exports are still the biggest demand growth factor for the NG market. I’m sure there is some very expensive suppliers of LNG data that I cannot afford to clear this up for me. In the mean time I feel I must be cautious. Since LNG is still the biggest growth factor for demand, yet has the most potential to get held up, I must remain paranoid.

Anyway, enough of that. Of course I cannot trade today since the stock market is not open. I will still be holding 75% of my funds in UNG. Right now the price of UNG would be near $14.75. If prices continue higher tomorrow, I may consider another reduction, maybe in the from of a stop. Patience…

Oldinvestor

Morning Update Feb 14, 2020

First off, weather is predicted to have cold coming in, and prices are suppressed. The current weather forecast is showing some of the coldest days we’ve seen this winter. Why aren’t prices responding by rising. Maybe by Monday they will. Remember, this market has been slow to react to anything, especially anything bullish.

I have to say I’m sill nervous about the coronavirus and the effects it having and going to have on the global LNG market. The focus, of course, is still on China. I just saw an article about European prices falling “Nobody Can See Bottom for Europe’s Plunging Natural Gas Market” at Bloomberg. This is not directly related to the coronavirus, but it all fits together if it’s all occurring at the same time.

Though I’m nervous, I am not panicked. I’ll continue to hold my 75% of funds in UNG, but I will not be adding until I have some sense that LNG exports are not going to slow. All the talk of how “Chinese buyers of LNG have to take gas or pay” doesn’t mean much. These contracts of “take-or-pay” is not on the entire amount that is being delivered. Say 80% is take or pay. That means 20% of exports could stop. Also, if they choose to pay and not take the gas, that still shuts down exports or at least leaves them looking to redirect somewhere else. All of this comes down to the fact that LNG exports will slow by some amount, and NG pricing will not respond to that well.

I may be getting the cart before this horse with this coronavirus/LNG idea, but I am still holding long. If by some chance I am dead wrong, prices go, and my account will go up more slowly than I was expecting (I was expecting to buy UGAZ and keep that in play more). If I am right, prices will fall further; probably not all at once. A fall in pricing can creep up on a traders and before they know it, they are down 20%+.

The day there is a cure/vaccine announced for coronavirus, on the market, and proven to drastically slow/stop the spread, I’ll be ready to drop all this. I did read Inovio Pharmaceuticals, Inc. (INO) had developed a vaccine in about 3 hours, but I guess it takes like 3 months or more to get it to market.

Aside from all that, US production is still, slowly weakening. Any disruptions caused in LNG should cause prices to fall further. At that point there will be more bargains to be had. I would simply rather wait to see if those bargains do show up.

For now I’m holding my current position in UNG at 75% of my funds, I most likely will not make any moves today. Good Luck

Oldinvestor

Morning Update Feb 13, 2020

The natgas market, since 2017ish, has given me the feeling that traders are 0 forward thinking. In other words, the traders don’t seem to anticipate much. There is no reason to panic over this virus problem, but there is reason to be cautious. And to me, a reduction is the only real way to be cautious. Better to lose 5% and be cautious, than to be reckless and wait for a 25% loss.

My reason for reduction is built on the idea that the natural gas market cannot withstand even a small disruption in demand without the price suffering, even while prices are already this low. No matter how you spin the coronavirus story, it is still real and still has affected the Chinese economy at minimum.

on with the reduction, I’ll look at the rest later…

I”m reducing UNG back to 75% holdings. This is really a minimal loss, but my breakeven from inception is $15.8 or $15.71 if my UGAZ gains are included. This leaves me in a tight spot; I can only be content that I am not holding UGAZ. My account is down by about 6%. Had I been holding 75% of UGAZ right now, I may be down 20%.

I can’t help but feel the coronavirus is being hyped up by the media. Any news of coronavirus spreading heavily to other countries, I’ll take that as a real sign to be all out of UNG. It is important for me to make this clear. It is bad enough that China is being hit with this, but any major outbreak into another country confirms the fierceness of this issue. Please be cautious right now.

Oldinvestor