Morning Thoughts – Oldinvestor

LNG is still the king bear with the biggest potential to turn the market around. Production is still the biggest bull with the potential to turn prices negative with any rise in supply. Something that HFI posted on Twitter last night was there was a major revision in production through their vendor of data (Pointlogic, now owned by IHS Markit). They didn’t write a free article on this info, so I shouldn’t say a ton about it. The image shared (one of the last things I retweeted yesterday) showed production being revised lower by near 2 Bcf/d for at least a couple weeks now. This is great news, but it doesn’t take away from the idea that storage is still in a very bad place and the market is still struggling with keeping storage from getting way out of control.

There are a lot of numbers being thrown around for EOS (end of storage). You know the highest point storage gets to right before winter begins and we (the US) start using the gas much faster and drawing out of storage. Many sources are claiming EOS will get to a record high this year and it is possible some regions of US storage could reach maximum capacity. Now max capacity could be more theoretical than we understand, but we may be testing those limitations soon.

The links above are full of good info on storage. The EIA is a good source for basic, yet very useful data on naturgal gas.

I have a call. The last link is storage for each region. I should return.

I’m holding my position still.. 60% in UNG

I’m back; if we were to look at the storage dashboard (the last link above), we would see south central storage is already 80% and and 84% to full capacity.

Just like if any region runs low on storage in winter, prices can shoot up. If south central storage were to run full, prices could go negative in anticipation of this. I’m not saying this is a sure thing, but it is something to hang on to. UNG could end up in a situation similar to USO where they are forced to roll forward sooner and spread out their holdings to protect from destroying the ETF. Why this probably isn’t going to happen, yet at least…

Weekly South Central Salt Storage from 2015 – Present at RonHenergy.com

Looking at this chart by Ron H. we can relax knowing that salt is at least going to get some temporary relief soon from summer demand. For July/August, power burn in this region will cause Salt to dive again. My concern is will it be enough since most LNG exports operate in the same general region. Is the lack in LNG demand going to send more gas into storage in this region. So far it looks like there has not been an influence of LNG on Salt storage, because the curve looks similar to last year and storage is still below 2016. This all could change, but I’m just trying to look at this from both sides. I’m actually a bit more concerned about non-salt storage.

Weekly South Central Non-Salt Storage at RonHenergy.com

The south central non-salt seems to be building at quite a high rate, possibly indicating that the lack of LNG demand is sending more gas into this region of storage.. I don’t feel so good looking at this. This whole concept forces the idea that LNG is going to crush this. Keep an eye on this if you are long. This would cause me to dump all my holdings in UNG. hmmmm

I’ve got another call… good luck

Oldinvestor