Random Update/Thoughts

I just got to read my first email from a reader! How exciting. I am thankful for all the feedback I’ve gotten on Twitter, and now my first email.

To be blunt? This week has kinda sucked. I work full time, have a full time family (Whom I’m am grateful for and love very much). Sometimes life is just chaotic, and the challenge becomes more than we can keep pinned down. I’ll get ahead of it again, like now!

The market. What is up with this natgas market? From a storage/supply/demand perspective, I have no idea. There is so much that can be considered late bloom, then there are those moments you want to take a risk. Is now the time? I know that makes no sense

Storage is always a major focus, well….

NG storage vs 5 year average at RonHenergy.com

Storage doesn’t look all that out of control vs previous years in comparison to the 5 year average. I don’t need to post the pricing to compare each year to each year of storage here. Storage is not the problem, obviously. So production?

Production stats by Bluegold Research in a free article

Bluegold posted about the time I started my post so it’s recent data. The above chart shows the recent declines in production. I’ve been looking at this same stat as year-over-year chart; the continuous chart looks much more defined (if that’s the right word). There has been quite the fall in production from the peak of total dry gas production.

Production was my main focus the last couple of months. It is hard to say that production is going to continue this down trend. Reading “reductions in CapEx” a number of times has given me the impression that natgas production is all but done growing for now.

So if production really is on the decline and storage isn’t really that bad out of skew from the 5 year average, why are prices falling? My main concern is LNG exports, as mentioned in this morning’s post. Outside of that, it must be a self fulfilling chart prophecy reflection of 2015/16.

Either way, I’m going to continue on the long side of this. I will soon post my history of UNG trades and my strategy going forward. I hope everyone has a safe and fun weekend. Go Chiefs!

Oldinvestor

Morning Update Jan 31, 2020

Total chaos this morning (at my day job that is). My UNG average is now $15.58 with 95% of funds invested. I’m also holding UGAZ with 5% at $46.75. I do not plan to trade today. I cannot see UNG getting back to $15.58 today, and if prices fall, I will make a decision later today.

I’m beginning to believe this market is scared the LNG market is flooded and this could have further (major) negative effects on the price of natgas. A search for LNG on google is bringing up far too many articles to read through every day. Here is one worth taking a look at.

I cannot say what will happen today. The EIA report was slightly bullish, and prices fell. That gives me the impression today is not going to be an up day. I have started on a plan to convert UNG to UGAZ slowly, as prices fall further. I have almost completed Part 3 of my UGAZ short “research”… Haha; He said research. I’m hoping for a boring Friday here. I will be keeping an eye on things randomly today and will post to Twitter if I make a move. Good Luck

Oldinvestor

Morning Update Jan 30, 2020

Gas prices are trying to create new lows here, and almost succeeding. Prices did fall to 1.83G20 or 1.826H20, neither of which have been exceeded yet.

I’ve gotten busy with work. I’m buying UNG with my last set of funds at $14.44. I’m 95% in UNG and 5% in UGAZ. I’ll have an update soon.

I know I am interested in converting to UGAZ when natgas pricing get closer to $1.80

Morning Update Jan 29, 2020

Weather forecasts are back to HDDs continually weakening yet the maps look like there should be more above normal HDDs moving across the US. My first thought is the market is going to test support today.

NGH20 on 3 hr chart at Tradingview.com

Pricing is between my support and resistance lines, slowly moving down. I’m obviously not interested in shorting here, but I’m going to take a small chance today if the price will drift a little lower. Fundamentals are not exactly supportive of the market going higher, but the lack of shorting power by managed money is not exactly supportive of going lower. Not to mention pricing, which is not supportive of production right now, and the list goes on.

I’m going to set a limit to buy 1 share of UGAZ at $46.75. 1 share for my $1000 account is just under 5% of funds. So, roughly speaking, I’m going to buy UGAZ at $46.75 with 5% of funds today if the price will reach my target. If this limit order gets filled, I will then place an order to sell UGAZ at $49.75, making $3 on the trade. I’ve had 3 chances in the last 5 trading sessions to make this trade, it would have added 1% to my account. this, to me, is worth the risk of investing 5% in UGAZ at $46.75.

Order placement of a conditional order

I can place this limit order as a conditional order, to buy at $46.75 with the condition to sell at $49.75. This is nice, but I cannot place this order as a pre-market order. I’m ok with this. If the price falls pre-market, there is a good chance it may fall past my buying mark. The good part of this order, if it buys at $46.75 or lower, it will automatically place the sell order at $49.75. This trade reflects the need I feel to trade more noise in this range. A small amount of UGAZ can go a long way in either direction, thus my reason for only 5% for now.

I will still have my order in to buy UNG at $14.40 with 15% of funds and reduce 38% of my current UNG position at $15.85. Good Luck

Oldinvestor

Morning Update Jan 28, 2020

Sometimes it’s good to have a plan for those days you have a cold and took cough medicine with allergy meds in it. Anyway, the story is still the same story. The market is still oversupplied under average weather conditions. Exports are still on the up, and Imports from Canada are slightly down year over year. This is not yet enough to turn the market around.

NGH20 on Daily chart at Tradingview.com

It would appear the price is either going to bounce here or break for a new low. I really have no idea, weather forecasts are showing some cold coming in, yet pricing is near the low. Beyond that I have nothing new today.

I’ll be holding my 80% with the same idea of reducing at $15.85 and adding at $14.4. Patience… If the prices falls this morning, i’ll try to keep an eye on it and let it go past $14.4. If I get busy with work, I’ll just take it where I can get it below $14.4. Either way, I feel like I’m going to be buying this week, quite possibly today. Maybe tomorrow I will be discussing UGAZ. Sorry about this short message today. Allergy medicine really knocks me out. Good luck today and Patience.

Oldinvestor

Morning Update Jan 27, 2020

I’m a bit disappointed with where prices are this morning. I don’t like following weather, and this is why. Though it could be easily argued that current prices are warranted, it is still a bit disappointing. I cannot really expect prices to rise fast in this market; there has been 0 forward looking in the bullish direction. In other words, few traders expect the price to rise, most believe that prices are exactly where they should be. I agree for the most part. With that said, if cold does develop and the current forecasts stay cold, prices should grind a little higher. UNG could easily make it to $15.85.

NGG20 on 2hr chart at Tradingview.com

Ok, starting over on this paragraph once again. I’ve had a cold and conveying this message is a bit more difficult. It is quite simple, Step 1. Market mentality is bearish (prices will go lower). Step 2. Prices are already very low, this limits the bearishness (keeps prices hovering here). Step 3. Factors that change supply and demand, like weather will push the price around within the market mentality’s limits. I see that we are at the top of the range because the mentality is that we head down without more impressive demand, which would come with cold weather. Prices went right to resistance and started falling, which will feed the bearish market mentality.

EIA weekly natural gas storage report for week ending Jan 17, 2020

With the latest storage numbers higher than the 5 year average and building faster than normal, this also feeds the bearish mentality. Low prices will ultimately cure low prices, I would argue the market is just entering this area. Looking back to 2016, prices can easily drop lower and quickly, but there is also a lot of noise and rebounds for those low prices that are seen. I’m counting on this happening if I’m going to start trading UGAZ. I believe $14.4 is near the perfect price to finish getting into UNG. From that point on, rolling to UGAZ should be very interesting, and for me, very fun. Nothing quite like skipping along bottom. Though I haven’t scraped any profits yet, it may come with UGAZ. That is if the market will go ahead and drop on down…. Patience.

So I think it is clear, I am 80% in UNG with an average of $15.85. I will place a limit to sell 38% of this position at $15.85, reducing my position to 50%. If prices slide lower, I’ll enter UNG with my last 20% of funds at $14.4. If prices happen to rise and do not look like they will make it to $15.85, I may sell a lesser amount than 38%. I am not yet ready to make that decision. If I do, it will be posted on Twitter. Good luck

Oldinvestor

Morning Update Jan 24, 2020

This is not winter’s last chance to spur natgas pricing, but cutting it close when considering the forecast. HDD averages are already falling, and another month or so winter will not be a consideration any longer. The recent forecasts (the last couple of weeks) have shown spikes in HDDs, but the maps did not seem to show cold in the right areas to produced HDDs greater than the average. I don’t know weather so well, I just know what I’ve seen in the past. Now the maps look more impressive than the HDD chart. It’s really all the same, because it’s a promise of cold too far out to be an accurate prediction. Being patient none the less.

NGH20 on 2hr chart at Tradingview.com

So much for a breakout from my wedging pattern, as it laughed in my face. Price still matters. With NG prices approaching $1.85, I’m approaching “All In”. I would like to see a fall today and be all in late today. Late today, late today. Emphasis on late today. As in 1 pm – 2 pm Est. time. UNG must fall below $14.4 or I will not buy. If prices fall fast, such as UNG falls to $14, I’ll go ahead and buy if the trend looks to have bottomed there. This scenario is very unlikely given that prices have struggled in both directions above $2. Now is not much different.

Remember, production is still showing signs of stalling. Producers have said over months in the past, they will be spending less on new drilling activities. Every formation that is drilled eventually has a plateau that coincides with how many wells that are actively producing. From what I remember, back in 2017 or so, Appalachian wells turned out to be much larger producing and efficiency gains were huge. Massive even… This surprise factor has nothing left for the market. I believe a bearish surprise will come in the form of either A. pipeline additions in the Permian area, and/or B. LNG market is flooded enough, trouble begins with LNG exports and the US cannot send out enough. Pipeline additions are not really a surprise since we know they are going to happen and soon.

Here is an example of pipeline expansion. This article speaks about Kinder Morgan’s focus on expansion to Mexico and LNG facilities. That being the case, these pipelines may not help gas get into storage, but feed high demand areas of the market. This also puts pressure on the idea if the LNG market implodes, NG prices here could be valued at less than $2.

All this is said as a warning. I’m betting not so much on weather, but that LNG additions this year move along smoothly and production continues to stall or even decrease. If production just stops increasing and LNG continues to increase, prices should stop falling and rise about $2. If production decreases and LNG increases this year, I fully expect $3 by November 2020. I would not bet on that with futures contracts or options. I’m only trying to scrape in 1% at a time here.

With all that out of the way, Low prices cure low prices. Even without a big turn around in this market, there is going to be a lot of back and forth in this range or the next range lower. I welcome the back and forth more than just a major turn, because I’ve always traded the whipsaw better than anything. I will always admit I’m almost always early, but I’ve learned to managed my risk to my satisfaction.

Speaking of my position, still holding 80% of funds in UNG. I hope to take that last step into UNG today. Now that I’ve typed you to death and warned the prices may go lower foreverly, I’m going to just place a limit order to buy with the rest of my funds. Placing a limit to buy UNG at $14.4 with a hair more than 20% of funds. There was a little left over so I’m getting a couple extra shares. If this order takes, I will be 100% in with an average of $15.51 Sorry if I rambled on a bit too much this morning. Good luck

Oldinvestor

Morning Update Jan 23, 2020

Well… weather models are back to teasing with forecasts of cold coming, how much and how long, or how true for that matter? No idea. This should still have a slight influence on pricing this morning. Emphasis on slight. Mostly traders taking a small chance I would imagine. It is EIA Thursday, with what is expected to be another relatively weak draw. Production created a new short term low of sorts, something to have patience with.

Anyway; on to the chart. I have a slight break from a wedge on 1 hour. Not sure why I was looking at H20, but that’s what the ETFs are in right now so why not. Zooming out there may be a inverted head and shoulders forming. $2.15 for H would certainly be a nice target. I’m not good at targets, so don’t take my word for it.

NGH20 on 1hr chart at Tradingview.com

Not a lot has changed for me, I’m holding tight with my 80% holding in UNG. Same plan as usual. I will sell 38% of my UNG holdings at my average of $15.85; I have a limit order in now to sell. If sold, I will still be holding 50% of my funds in UNG. A $15.85 price for UNG is close to $2.03 for the price of natgas. After a while of making these losing trades, I decided to always reduce at my average by some amount.

If the price moves higher past my average, I will continue to hold 50% for a while longer unless there is a sharp move up. There should be time to react if that happens. As far as buying, $14.4 will most likely not come this week unless today is horrible. Again, plenty of time to make a decision on that. Good luck.

Oldinvestor

Morning Update Jan 22, 2020

What we know

  • Oversupplied but stalling
  • Weather forecasts could be more bearish, but not very likely (surprise to up side)
  • Prices are awesome
  • Be patient
NG1 on 2 hr chart at Tradingview.com

Prices are moving sideways again. I suspect a lot of technical numbers like $1.83 and $2 are being thrown around right now.

There isn’t much to say about the oversupply, the EIA Drilling Productivity Report shows signs that most plays are weakening. It is odd to me that Haynesville has added DUCs and production. Unlike Permian, Haynesville is mostly dry gas and shouldn’t pushing gas in order to get to the oil. It is possible there are many contracts in that area in connection with LNG with hedged pricing. This is what I’m left to assume.

Weather is weather and the forecast is showing consistently warmer than normal temperatures on the way. Normally I would be very bullish on such a forecast, I’m already too bullish to increase my position at this point. When pricing is low and the weather forecast looks as thought it can’t get much more bearish, this is a sign for me to be on the lookout for a surprise to the up side. Being that the market is overwhelmingly bearish, I would imagine this isn’t quite as effective, but I cannot say for sure. With short positioning at an extreme and weather at a bearish extreme and price at the lower end of the spectrum, a spike in HDDs could trigger the next bull move.

Prices are low, but could go lower, that’s all I’m going to say about that. It’s time to be patient. If the price moves higher today, it’s gotta get to $15.85 for me to reduce my position. I will go ahead and place a limit to sell the last portion I just bought, which is 38% of my holdings or 30% of my original funds. For example I’m holding 50 shares in my $1000 example account. I am 80% invested and I want to sell 19 shares when UNG reaches $15.85. 19 / 50 = 38% I’m still not a big believer in this market moving a lot higher, but I will be slow to evaluate if I want to sell more than 38% when the price gets close to my average. There is still a strong chance the price moves lower before higher; I’ll be interested in buying more UNG below $14.40 if prices move there first. Good luck

Oldinvestor

Random data – Storage vs TDD – Jan 21, 2020

Difference in storage vs 5 yr average storage – weekly provided by RonH

The above is the difference between storage and 5 yr average storage. In 2015 existed a deficit in comparison to the 5 year average. During 2015, the storage deficit turns into a surplus in 2015/2016. A similar occurrence is happening now in 2019/2020.

Another way to look at this is to compare each build/draw to the each week of the 5 year average. This, to me, shows the consistency in build/draw of storage vs the average.

Weekly build/draw difference vs 5 year average – provided by RohH

HDD during 2015/2016 vs Long Term HDD averages provided by RonH
TDD during 2019/2020 vs Long Term TDD averages provided by RonH

I didn’t see TDD for 2015/16, so I am looking at HDD only. The significant swings in HDD and TDD can be see in storage around the same weeks for each year. I’m looking at this to get a comparison to the 2015/2016 plunge in pricing and compare that to storage. The dynamics of storage are what create swings in the market. The anticipation of over/under supply. Weather is the largest contributor to swings in demand, and swings in storage. Thanks to the colder than normal weather in Nov/Dec of 2019, storage kept fro building as fast as Dec of 2015.

It is impressive to me how similar a path pricing and storage is on track to compete with 2016. Prices could very well travel to $1.61 again as in 2016. I remember getting into trading ETFs around the week that NG prices bottomed out in 2016. At that time, I barely had an understanding of this market and what it was capable of. That being said, I can’t say right now feels any different for the better or worse. I know not to try and call bottom, and I know to be happy I’m not holding UGAZ, barf….