Morning Thoughts – Oldinvestor

Back to the grind. I’m a bit surprised, though it was Memorial Day weekend. July NG prices have tested lows again and have yet to break down. Anything can still happen, what do we know:

  • LNG exports are way off and getting worse – The biggest bearish factor
  • Production has fallen around 8Bcf/d from Nov highs – biggest bull factor
  • HDDs/CDDs have been bullish for a very long time – imagine that
  • Overall Demand is holding – due to elevated HDDs/CDDs

Weather has been pretty incredible to support demand ever since it took a nose dive. This may be the very reason why prices are still holding. I’m going to keep this short. I think any news of LNG exports or production shutting in or coming back online that will be the deciding factor. One might argue that LNG is already known and priced in, but I don’t believe that completely true. The market in the last few years seems late to react to such news, waiting until the last moment to respond to fundamental changes. There was a reaction last Wednesday to news of LNG export cancellations in July. I’m saying July contract could fall further as feed gas to LNG export facilities falls further. Just stay cautious of this and associated gas news (rise in oil production in areas like Permian).

My position

UNG – 50% in with an average of $12.03

I got a little anxious to bring my holdings in UNG up to 50%, now I think it was a bit too soon for that last 10%. I can still manage my position; I do need to wait for July to break down at least to $1.75 before adding again. I have no expectation of a change in position today. I have been interested to reduce my position by 10% at break even, this time I think it will be 20%. So if UNG prices get to $12.03, I will have my finger on the button to reduce down to 30% holdings in UNG. Sit and be patient to add. Good Luck