Morning Update – March 27, 2020

Production continue to be a shade lower than the previous day. For the most part it is flat, but at the bottom of slight down trend currently. Something I want to point out is Oil production this point.

There numbers are up to week 12 (last week). Ron H. does a great job of keeping track of these numbers at ronhenergy.com

Weekly Oil production at RonHenergy.com
Weekly Oil Exports at RonHenergy.com
Weekly Oil Imports at RonHenergy.com

So I wanted to see if there has been much change in oil production, while at Ron’s website, I thought I would go ahead and look at Imports/Exports. Production hasn’t really budged. This tells me any fluctuation in gas production is not due to fluctuation in Oil production. This is bullish for gas because gas is declining on its own. With any decreases in oil production, associated gas declines will become even stronger.

As far as demand goes… I still have no idea and have been very busy with work to even do a search. By the numbers I have, demand for gas is still looking fairly normal for this time of year. I have heard roomers about demand for Power burn to be weak this year. But that idea cannot carry much weight on the market. Gas is still so cheap, natgas fuel will be used for electric power generation. I’m sure coal prices have plummeted as well, but if gas is less that $2, gas is just easier to deal with if the prices are comparable.

Overall, prices are cheap, demand that is not skewed by the coronavirus will secretly grow and production will continue to decline. It won’t take much longer of oil prices this low, within weeks/months, and oil operations will fall off a cliff. It will still take a while for oil production to decline by much. I should emphasize, this talk of associated gas production declining is not something to get excited about for the next few months. Associated gas is not going to have some drastic change on the market by next week or even next month.

OK, gotta finish up

  • weather – what? how cares
  • gas production – already on the decline, been months in the making already
  • associated gas production – going to take a while and may not be as eventful as you might think – but will boost the mood of NG traders
  • Texas has a lot of gas and a big backlog of DUCs – look for production declines elsewhere
  • Demand destruction – this will become key in the near term
  • Nation wide lockdown – doesn’t mean people will not be working. Big gas consuming industry may still be considered “essential” and keep industrial demand high.
  • Commercial demand – In my limited brain capacity, I think this will be the hardest hit demand category % wise, due to closed retail locations. This is a very seasonal category, so the effect will be small since the season for commercial demand right now is already low.

I’m leaning ever more bullish because of price, production is on the decline, and demand destruction will not be so great to cause much more of a drop in gas prices. This does not mean I expect a large jump in pricing. I just feel it is relatively safe to be long in UNG or short puts. We are talking it will take a lockdown nation wide to push prices lower??? That’s a big deal just to get 25 cents lower out of the price of gas. I hope we do see a price slide soon so I can get in more UNG, it should not last long.

My position

UNG – 44% funds – average of $13.61 – last purchase was 5% at $12.61

USO – 15% funds – average of $5.03 – last purchase was 10% at $4.925

I feel confident enough neither UNG nor USO will move enough for me to make a move, I’ll check back periodically today, and post to twitter or Stockhoot.com. Real quick, about Stockhoot; I’ve signed up for free to try out their service. I’ve started a free to follow official NGETF.com trades. I’m close to my real position of 44% in UNG. In stockhoot I am showing roughly 40% long on UNG. USO is only 5% in, but I’m just giving them a try. It is free to sign up, my trades will remain free for at least the next year or two. I don’t see a future where I charge people to see what I’m trading, but it’s a good place where someone else is tracking my progress and keeping me accountable. Go check it out.

https://stockhoot.com/ExtServiceInfo.aspx?type=Service&Id=b6931df0-5dad-462e-8d28-06699706a437

I am playing with some VIX options stuff under a different “service” that will not affect my NGETF performance, just ignore those. I’ve not been very active with those and I’m sucking at those. What little focus I have right now is still dedicated to Natgas, and little oil. Good Luck

Oldinvestor