Morning Update – April 10, 2020

I’ve been so busy with work and life, I need to adjust how I do the morning update. I’ll first show any positioning updates, then any key elements I think are important to know of the day and sometimes week ahead.

I’m not really equipped to be giving out consistent morning data updates. I would recommend HFIR or Bluegold for this.

https://seekingalpha.com/author/hfir#regular_articles – This is the link to HFIR, I have subscribed to this for 3 years now. HFIR shares daily updates similar to what I’d like to do, but they have a better supply of data. HFIR offers an oil and gas service; they also offer a natgas only service at a reduced price.

https://seekingalpha.com/author/bluegold-research#regular_articles This is the link to Bluegold on Seeking Alpha, or you can go to Bluegoldresearch.com From what I’ve seen of their free articles, they offer a good service as well. I know subscribers of HFIR who also subscribe to Bluegold and like both services. Both services offer a free trial period of at least 14 days on seeking alpha.

I haven’t even thought about a standard format for sharing my position. I’ll try to think about this over the weekend. Something quick and easy to glance at and go on with your day. That’s what I had intended upon with this site anyway. For now:

I’m holding 31% of my funds in UNG with an average price of $13.41

I’m also holding 5% of funds in USO with an average of $5.03

Maybe I can do a snapshot of excel or something. I’ll come up with something. As for notes today. I think there are too many theories about what the future holds. This is my reason for slowing down my trades. Some are calling this a time to go long, other are paranoid. I like the long side and I’m always paranoid so I’ve kept my positioning small for now. I did read Mexico is not wanting to cut production; this is a problem for the OPEC accord. It will mostly likely get worked out. We will find out before Monday.j

Gas could still get pulled in any direction. Just keep in mind Supply/Demand/Storage. In 2019 supply had overrun demand and by early 2020, supply fell enough to balance the scales. There was still more gas in storage, and with a barely balanced market and too much storage, prices stayed down for the immediate contracts. With production falling, 2021 contracts began to recover. This is because the market believe that demand will now be greater than supply and by 2021, storage will shrink, which makes gas worth more. 2021 contracts are still gaining some strength, especially in relation to more prompt contracts. Right now is a good example:

Natgas futures curve at Barchart.com

We see that May and June contracts are in the red. There is a surplus of storage gas, and demand is starting to decline and the market believes there is plenty of gas for May and June. Winter contracts are up because traders must believe demand will recover soon and the market will be under-supplied soon by winter. Also, as with any under-supply, storage will slowly get behind, making high demand winter months worth more.

The part that where people need to calm down and wait for: We know demand is going to shrink temporarily, we don’t really know by how much until it happens. We know production will shrink forcibly due to demand shrinkage. Shrinkage is a funny sounding word. Anyway. So there are assumptions that with oil production being shut in very soon, gas production will drop more than demand destruction. It is also possible that gas demand recovers more quickly than oil and associated gas production will recover. I like this theory and there is a lot of numbers floating around out there, some believable, some a bit extreme. I remain long sided and paranoid.

Nothing has changed for me, except the timeline. I remain long biased because prices are too low to ignore going long. It may now take longer for prices to recover. At the same time; production will take more of a hit, so if demand does recover to a strong level, the market will go further under-supplied. I’m not counting on this, demand may not recover and shale production is very fast at recovering when prices look even half decent. But that’s it. I’ve alreay written way more than I expected to. I hope everyone has a good/safe weekend.

Oldinvestor