Morning Update – May 14, 2020

To help with the idea of how much is 30 loads of LNG

US LNG export volume and number of loads per month at RonHenergy.com

This is the total number of loads and how much gas was loaded each month onto boats.

I don’t really have time to add to this, but LNG is/has now been officially highlighted and maybe the main reason for the recent fall in NG prices. I’ve also been giving credit to the bounce in oil. Everyone gets all excited that oil is crashing and it’s going to drag down production, and associated gas is going to go down with oil. That’s all hype until it happens. I’ve heard a lot about oil companies cutting back, but I haven’t heard numbers for associated gas and it’s not something that is easy to organize all these numbers. I’m just saying, everyone got a little too excited, even I go hooked on that idea for a bit. Now everyone is getting excited about oil bouncing back and gas is going to suffer; supplies will be back up and so on. This may not be so true either. Oil demand is recovering, but the damage has been done; oil production may bounce back some, but future investments in drilling have been shot in the food for both oil and gas. Gas has been a longer time coming because prices for natgas have been suppressed for quite some time. US demand is already showing signs of life; the problem circles back around to LNG exports.

So I have two thoughts on all this. US demand will probably recover quick, if it has not already (mainly because it never got hit that hard to start with). I don’t think the immediate supply cuts are enough to offset the cuts in LNG exports, this causes the market to clearly go back to being over supplied. Also, storage is already near 400Bcf over supplied as it is (vs 5 year average). This is the deciding factor. I seem to lose track of this from time to time. All roads lead to storage and how well the market is managing storage. We have plenty of gas, and plenty more coming in than going out. Also it is build season, so if the market appears to be building faster than normal and storage is far over filled already… you get this idea?

The LNG factor is the hinge pin. As soon as we believe LNG will get back to some normality, and the exports will stop declining, the market will decide to balance out. Depending on storage figures are compared to the 5 year average at that time, will determine if pricing holds where it is, bounces around, or decides to trend up. So, as usual, I started going long too soon, natgas is not at risk like oil as of yet. There is still enough demand, prices don’t appear to be wanting to go to zero or negative. I will remain cautiously long.

My position

UNG – 40% in with an average of $12.36

I will not buy before the EIA report and my last purchase price was $11.26. So I’m in not rush to layer on. I’m content with my average. Be patient. Good luck

Oldinvestor

The world needs gas, LNG demand will need some time. Someone on twitter mentioned gas storage is full in other parts of the globe. Just like in the US, storage will need to be used up a bit, and our dealing with the pandemic will determine how soon. Right now it is too soon to know. again, Be Patient….