Morning Update – April 16, 2020

Update: 3:13pm est. time: I will set a limit to reduce UNG back to 31% at my break-even price of $13.28. I will keep this order open tonight and tomorrow morning. I’m going ahead and adding to USO with 5% of funds at $4.25 My holding for USO is now 10%.

Natgas production numbers might be showing signs of a strong decline. Remember there is a lagging effect on the production side. I’ve two ways in which production can delay falling. The first would be in a normal market that we’ve had until the virus came into existence. The market is oversupplied, prices fall gradually as they did in 2019, and the market takes forever to compensate by reducing or to at least stop adding to production gains. The second is as I hear HFIR state it, the readings for production aren’t coming from the wellhead, they are from further down stream. So it may take days for production decreases due to wellhead reductions/shut-ins to make it to the data supplied by venders that deliver supply and demand data. Either way, we can anticipate this decline in production. Though we don’t know how much the decline will be, we can bet that it will eventually match demand. When I’m trading, my hope is that the market is overreacting to the current declines in demand, and it will correct in my favor when production declines come into play. This being said, I’ve been early on the jump almost every time I start buying.

Well my time has been up. I am getting too busy with work. I have been trying to get back to this one statement for about an hour now. I’m just going to post this

UNG – 36% of funds invested with an average of $13.28

USO – 5% of funds invested with an average of $5.03

If there is a drastic drop in either UNG or USO today I’ll add to my positions. NGM20 is at $1.72 and CLM20 is at $26.34. There is a lot of contango that could cause both UNG and USO a lot of problems. This and the extreme unknown about the market and the economy is reason to stay extra cautious. Good Luck


Side note:

“Maintaining social distancing of 6 feet when possible.” As long as “when possible” remains the approach to this problem, the problem will remain in tact, and quite healthy.