Morning Update Jan 2, 2020

I’ve been pretty focused on “analyzing” a UGAZ short. I’ve been considering the idea for a while. Let’s get caught up first, then I’ll touch on shorting UGAZ.

Power burn continues to impress me. There has been a lot of growth in this area. Unfortunately, projections show that Natgas powered plants are scheduled to reduce expansions this year. Of course LNG is still going strong, and Mexico exports are up slightly still year over year. Total gas supply (including Canadian imports) continues to hover around 100Bcf/day.

Fundamentally, gas supply is still far stronger than demand, this will continue to be the case a while longer. Weather is not being helpful to winter demand factors. The forecast continues to tease with chances of cold 15 days away. Once that same forecasted day reaches 10 days away, the excitement is gone. Managed money record short positioning, it would seem, is the only factor keeping Natgas prices above $2.

The charts aren’t showing any signs of a turn either. If the price of UNG begins to fall from here, I may be waiting a bit longer to add to my position. At least $16.3 or lower.

NGG20 on Daily chart at Tradingview.com

I will say the chart does seem to show the weakness in the ability of managed money to short gas more. That’s not going to send the price higher though, simply help limit it. As time goes by, even with record short positioning, the price will move lower if fundamentals (basically production) doesn’t change. We pretty much know what to expect from the demand side of this market, production is going to be the driving factor if prices are to recover back to $3. Even at that, it will most likely take until after July to do so. Possibly even next Fall/Winter season.

I’m going to leave it at that. I’ll be placing a limit to sell 25% of my UNG holdings at $17.12 today, and another to sell above that if gas even goes up today. I’m holding 40% of my funds in UNG, 25% would be about 10% of my funds. Keep in mind the EIA storage report is tomorrow due to New Years Holiday. I’m going to publish this post and start anew on my UGAZ short notes. Watch Twitter for trade updates.

Oldinvestor