The Heller Angle – May 18, 2020

Please forgive me for I am posting this from my phone with no edits, still the same great information.

NG rocketing higher today on a decent sized drop on production. The source I follow BlueGold Resources (no affiliation I’m just a subscriber of their service) is reporting a decline in supply of approximately 1.4Bcf. From what I’ve seen / heard, Point Logic (which also reports EIA data) reported a bigger drop, but that was in part due to them reporting a higher initial production on Friday. While the drop in supply is real, I think it is less and Point Logic (while very good) is lagging a little bit here. There are also rumors of supply shut-ins which make a lot of sense to me as well. Either way, supply is dropping. As I mentioned in my last post, EIA DPR is showing a decline of 0.89Bcf per day decline over the month of April. May is now out (https://www.eia.gov/petroleum/drilling/#tabs-summary-2) and I’m quite surprised that the report is only showing 0.78Bcf for May. I’m digging deeper now to see if I can understand why. I really thought the report would show >1Bcf.

As far as trading, I was also monitoring the 2.35×2.50 call spread for NGN20 (July) to sell as prices approached 2.04-2.10 with the current price of 1.966. The credit spread received was 0.014-0.015, with the increase in NGN20 that credit spread is now trading at 0.020-0.022. This is why I stay patient and wait for the market to come to me. I won’t always be right of course and sometimes waiting will be the wrong move. If you miss a trade, that’s ok the NG market gives a lot of opportunities. As I’m ‘preaching’ now, no trade for me, I’m hoping to get some follow through tomorrow that pushes the NGN20 to 2.04-2.10 and I can sell a credit spread above 2.50 where I feel that the market won’t move in 40 days.

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