The news of the week for me is a revision to production. HFIR shared this image on twitter over the weekend.
I say this is a revision, because I can’t see production physically dropping this fast in just a few days. I could be wrong, this could be a sudden change from the wells that have shut in production. Either way, it is what it is.
I’ve shared a few charts here to do a short comparison. I know this isn’t the best shared data, but I’m not allowed to share proprietary info without permission. This is the most recent of free data I found. It is enough to show a few comparisons to last year. Lets assume for a moment demand is very close to last 2019 demand numbers. Res/comm has been above 2019 due to high HDDs, Industrial dropped below, exports are near 2019 numbers, so it balances out for the most part.
I’m having a ton of trouble this morning with getting this post to work. This server seems to be having a lot of trouble. I’m going to publish this and slowly add to the post as the server allows.
So the easiest way to look at this is… to look at this last chart and the first chart. Demand, right now, is close to 2019 numbers, and production just dropped below 2019 numbers.
Seems pretty simple now, the market has swung to an under supply. This should show up soon in EIA reports soon. Also I must keep in mind storage. Even if the market is under supplied by 1Bcf/day, that’s only 365Bcf to remove from storage, so it’s going to take at least 2-3Bcf/day of an under supplied market to just correct storage by the end of the year.
Even with the revision to production numbers, this shift in the supply/demand balance must show up on EIA storage reports (which could take a couple weeks to show up). Storage is above the norm, and will keep a lid on pricing for now. With the recent revision in production, a little more hope will be given to bull mentality and prices may slowly trend up (as long as an under supplied market is still noticeable). Summer weather will have a stronger effect on pricing right now. Since the market is much more balanced, CDDs will have more influence to tip the S/D scale more toward an under of over supply.
UNG – 40% in with an average of $12.36 – placing a limit to sell down to 30% at $12.36 today.
I’m optimistic UNG could get to $13 – $13.5, this week even. I’m not counting on much more than that just yet. I am a bit on the fence about whether I should sell out at $13.5 or hang on to a little now that production has dropped. I may hang on to 10% vs previous 25-30% holdings in UNG, hoping for a pop in the price. There is plenty of time to decide, and I will have more confidence in my decision as the week goes on. For now I just have a limit to sell 10% of my funds at break even of $12.36 in UNG. I’m not interested in buying unless pricing gets to new lows. Good Luck