Morning Update – April 22, 2020

Yesterday morning I stated I am not personally trading any oil related products. Let me clarify. I am not trading USO/USL/UWT/UWTI/CL_F/CL options. I was actually in a 5/7 put for CLM20 until yesterday. I got burned, but not bad. Anyway, I’m out of all Oil related ETF/ETNs in my own personal accounts, I will not be personally trading them for a bit longer it seems. I’m not interested in shorting oil here, it could react quickly to any news of intervention by the US government or OPEC linked companies.

The story is still the same; oil is falling hard, begging for more production cuts (forcibly). Natgas demand is still holding fairly strong. Industrial is the only weak spot YoY, and only by roughly 1.5Bcf/d right now. I have seen some news about LNG getting hit a little harder now. Cheniere is receiving more requests to cancel shipments.

What really has my attention is waha gas pricing is near negative $5/MMbtu. This hasn’t been the case, and if wells in the Permian and Eagle Ford basins are getting shut in, whey would gas prices be going negative and flaring activity rising? This could be a indication that demand is being hit harder than expected right now. I cannot see another explanation for such negative pressure on natgas pricing in that area. This could be linked to LNG feed gas, maybe it is about to drop drastically.

For this reason I’m going to place a stop on 20% of my UNG funds at my break even price of $13.28. I would think if prices break for that area, there is a chance prices will continue to fall.

Current positioning:

UNG – 31% of funds invested – placing a stop on 2/3 of this position at $13.3

USL – 13% of funds invested – holding on for the ride to experience USL for the first time. (I sitll wouldn’t recommend to my best friend to buy this yet)

If UNG stops out, I’ll will be watching for news of more LNG problems or other demand cuts in natgas. I could also get back in quickly. That is still up in the air. Right now it is time to place a stop on UNG; one step at a time. Any changes, I’ll post here and twitter. Good luck