Morning Update – April 8, 2020

So I just had this idea while driving to work to start a website to do giveaways for small businesses who need promotional help right now. Starting out, especially right now, charge the business nothing for promotion, but they must offer something to give away. Then when life returns to normal, if the things are going well, start charging businesses to continue giving items away, and offer someone else a job to make a living and keep this service going…. Then I thought I could also buy a card printer, like a gift card printer to help these businesses sell gift cards to people who want to support them. You could just order a gift card for the business you want to support, and we could print it out (custom) and hold a small amount of the proceeds to pay for the equipment. I have my job that will probably continue on and lots of other people do to, and they may like to support local, but don’t know how and all that… That’s a lot of work. If the wife is interested, I would require her help. We’ll see.

Ok, on with Natgas, that’s what we are here for. I’m beginning to believe this idea that since we are not pumping exhaust fumes into the air, the earth is cooling fast. At least within a range it appears that way. I’m sure it is just coincidental. Don’t you know there is someone getting paid to study that right now. It’s been cold. Not enough to make a dent in demand, but it’s been cold to drag it out a little. Now that I’ve said that… This week, ignore most of what you know about natgas.

Focus on demand destruction and production shut-ins. The market could care less about anything else.

Categories for Demand:

  • LNG Exports
  • Residential/Commerical
  • Industrial
  • Mexican (pipeline) Exports
  • Power Burn (Electricity Generation)

Keep in mind here, I truly do not know how much demand will be effected by each of these. I am focused on Industrial and Power Burn.

I did a quick google new search “power burn natural gas” comes up with some decent results.

https://www.reuters.com/article/us-usa-gas-outlook/us-natgas-output-demand-to-fall-in-2020-2021-due-to-coronavirus-idUSKBN21P2R0

The above link is to an article by Reuters that talks about EIA.gov projections based on demand destruction. I find the EIA to be fairly conservative.

wow gas is tanking right now. hmmm, and now it’s bouncing back up. I’m half tempted to sell out this time. The last 2 or 3 times I’ve seen my balance get into the green, the next day it goes red again… Just hang in there. I’ve managed it, I will continue to manage.

Anyway, EIA is conservative with their projections. My hope is if things turn around quick, EIA projections will be too bearish, and if things get worse, EIA will be too bullish. For example; the EIA projects U.S. gas consumption would fall to 83.79 bcfd in 2020. Well gas is seasonal, but this is an average. Let’s see what RonH has for previous years.

US average daily natgas consumption for each year at RonHenergy.com

So 83.79Bcf/d is a big decline in total consumption. That sounds really low, but may not include LNG exports. OK, to clear this up, if I go to EIA STEO data browser and project dry gas production and organize so the chart is on an annual basis… The difference is basically, they are saying they expect a decrease in overall demand for 2020 to be about 1Bcf/d less that 2019.

US Natgas difference in consumption year over year at EIA.gov STEO data browser

Now production. EIA also projects dry gas production will drop to 91.70Bcf/d in 2020. Well I think that was already projected.

US natgas production difference year over year at EIA.gov STEO data browser

I’m leaving this post loose ended and not tying anything together because I’m not sure what to think yet. As stated above, the EIA is conservative in their numbers. I think both consumption and production will fall much harder in the very near term; like the next few months. I want to believe life will return to some normalcy and demand will recover considerably and production will still be lagging in a big way, but by how much I don’t know. I am confident production will decrease more this year than the EIA is projecting currently. They do change their projections as they see fit.

I’ve spent far too much time on this and need to go.

Still holding 31% in UNG with a break even of $13.41ish. I will sell out if the price falls back to that. I don’t want to start with 31% of my funds in UNG if the price is going to fall again. I might quickly start buying back in. For today, I think it’s safe to say I will be holding. I will put a stop on UNG right now at $13.41 just to be sure for the day. Good Luck

Oldinvestor

I almost forgot, I”m going to buy USO with 5% of my funds right now at 5.05 or so.