Morning Thoughts – Oldinvestor

There are a couple of articles here that I’ve come across putting emphasis on LNG weakness.

This article makes mention of both Trinidad and Nigeria in positions to be exporting gas to US export facilities; I’m sure at a loss. If you’re a small country that has very limited access to well services to bring a well online after you shut it in; it may be more advantageous to keep the well flowing and sell the gas for next to nothing than to shut the well in. Especially if these wells are offshore.

This article is from Platts, more gloom and doom for LNG

Platts Analytics said in its monthly report for May published on June 8 that liquefaction utilization in the US is expected to fall below the 50% mark in the months ahead, while utilization out of Australia and Qatar will remain above the 80% mark.

Yesterday I was not so sure about current export capacity and the near term expectations of exports for Qatar. Now I’m closer, if Australia and Qatar are both flowing at high rates still while the US is struggling. This gives me a bit of hope if Global demand will pick back up. US companies know they can’t compete with the likes of Qatar on LNG in this price range, so they make deals with countries to pay them if they don’t take our gas. Not a fortune, and not on 100% of the LNG that is sent to those countries. Basically it’s enough that the companies here will survive in this scenario. So companies like Cheniere Energy have to freedom to still operate without the threat of financial trouble because of low exports. So while Cheniere is probably not going to post stellar earnings, they will be around a while to keep the lights on and get back to exporting as soon as prices merit such an idea. Also they can take in LNG from countries who are giving it away and be even more prepared for the future.

All this is still terrible news for me, being long on NG, since demand is circling the drain. Eventually CHK will officially file for bankruptcy and we’ll get that ball rolling with other producers who finally cave, drilling is already doomed. One might argue that right now I should just stay out vs staying long. I would agree with this argument, but what fun is that? Sitting on the sidelines, psshhhhh.

As for me, still waiting.

My position

UNG – 60% in with an average of $11.73 – waiting….

Natgas is really struggling with the future of LNG exports. LNG grew to something of importance, only to bite the entire industry in the ass. Major adjustments will be made within the industry as a whole to solve the current problems. It will take forever, and some adjustments will even swing the market to under supplied for a while. Being on the long side, I will wait for this to happen. Good luck