Morning Update Dec 2, 2019

Well great news! NG is even more oversupplied now. Well that’s great news if you like this ongoing trend… Production has apparently hit a new high over the weekend. This is not an unusual for production to add during the winter season, but being that the market is already oversupplied…. The market appears to be on track to match winter of 2015/16. I believe this will spill into summer of 2020 now, whereas 2016 was a recovery year.

In 2015, oil and gas were more in sync with the oversupply theme. This caused more of a crash in rig count; whereas, now the rig counts are falling but at a much slower pace. Looking at the EIA Monthly Drilling Report, we see drilling rigs for most areas still not at lows seen in 2016. Appalachia region does seem to be tapering off quickly, but still not at lows. Any of the oil producing regions, such as Permian are no where near rig count lows, thanks to oil prices helping those companies continue to produce. This is not a strong theory, but just the figures shown in the drilling report tell me that production is going to continue on, prices will continue to fall, this will spill into next summer.

As for right now. Prices dropped hard Friday. This fall seemed a bit overdone to me, but it is what it is.

NGF20 on Dec 2, 2019 on Daily chart at Tradingview.com

Daily chart showing a bounce and if we hold, we’ll go higher.

NGF20 Dec 2, 2019 on 2hr chart at Tradingview.com

The 2 hr chart looks to be trending up still, with a slight pull-back.

I should mention I was short at H/J spread and I’m covering that now around 8c. This is in hopes the spread will pop back up above 10c-15c. I want to go long UNG here with a stop at Friday’s low, but I’m just not feeling it. I will check periodically today to see if I feel more confident in the trade. The market is just so oversupplied.

Oldinvestor