Morning Thoughts – Oldinvestor

Simon Property Group has headlines like “Simon feeling the pain” and such, and the stock is up 6% pre market? WHAT? Apparently investors thinks life will not be so bad for them and want in ahead of earnings.

So natty has gone silent to start the week. Bears took a beating; the market has shifted. I want to say natgas has found a new range. I believe this could change quickly due to supply and demand being so disrupted and both potentially coming back online.

I’ll use the latest free article by HFIR found here https://seekingalpha.com/article/4365406-natural-gas-market-set-for-pullback.

Daily production from 2016 to August 6, 2020

Looking back at March to mid to late May, Production fell roughly by 8 Bcf/d. I would say the market could easily bring back half of this production with minimal hassle. From mid to late May, production did recover half to only be down 4Bcf/d from March. Then another hit to production brings it down roughly 6Bcf/d from March. So I see room to bring some wells back online quickly. Maybe there is/was a maintenance event on a pipeline I may not be aware of.

Daily LNG demand from 1/21/20 to 8/9/20 at RonHenergy.com

Looking back at LNG demand in March, floating around 8Bcf/d. LNG demand dropped by 6Bcf/d at one point and is currently roughly 4.5Bcf/d down from its peak. Based on cancellations that have been reported, it is possible LNG demand will recover back to within 2-3Bcf/d of a drop from March demand.

So Production is roughly 6Bcf/day down from March and LNG is roughly 4.5Bcf/day down from March. With LNG expectations to increase another 2Bcf/d and no expectations set for production, the market has chosen to reflect this in pricing. In other words, NG traders became concerned about prompt pricing and drove prices for prompt contracts down harder than winter contracts in recent weeks. Now the market is making up for this by closing the gap between prompt pricing and winter pricing.

NGU20/V20/X20/Z20 on daily chart with Charles Schwab

As for are where gas goes from here I cannot say, I’m going to wait to make any changes to my account. Even today this gap between prompt and winter is closing. Natgas prices are down some all along the curve, but the gap is still closing. As for a direction. I have my BOIL short and UNL long, I’ll hang tight with that.

UNL – 50% of funds in from $7.4

BOIL covered puts

BOIL covered puts as of close 8/7/20

If I were to do anything here it would be to reduce UNL further and wait. I’m am not in the mood I guess and UNL is not really an ETF to be very active with. If I were holding UNG long, I’m certain that I would be all out right now. Good Luck

Oldinvestor