Morning Thoughts – Oldinvestor

Data points to the about the same story.

LNG has been hit, and will remain for another day it appears. Cameron is expecting loading to begin tomorrow 9/2/20. I’m not sure about Sabine Pass. Gulf of Mexico production is lacking still as well. I would expect that to recovery quickly, but I’m not sure of the status of the pipeline that is shut in to 4 platforms.

Life in the Natural Gas market is going to take a while to sort itself out. LNG is really going to screw with natgas a lot more than I think most of us realize. This thing with the Whuflu was a huge anomaly. LNG opens up the natgas market to many more, probably smaller, anomalies. It is steering the ship. This means you better have good instincts or a good supply of data on LNG and what is going on globally. This sucks. This was the whole reason I decided I didn’t have time for keeping up with Oil. Natural Gas was simple compared to now. barf!

I still stick with my plan. Stay short BOIL for decay and long UNL for long term rise in pricing that I believe is going to happen.

Fact remains, Storage wins eventually… This being said, to have the edge you have to pick up on what everyone thinks of what is and what is going to happen with storage. Near term, storage is over supplied. This winter will draw on storage as it always does, and will get a boost from LNG once LNG is back up to speed. Longer term will depend again on production. Gulf of Mexico and Texas were hardest hit by the decline.

Appalachia didn’t really drop from Whuflu, but has been on natural decline from a falling rig count. I haven’t looked lately, but right now I’d say DUCs are falling at a faster rate because of a drastic drop in rig count. The more an area produces, the more they have to continue at break neck speeds on the drilling side just to maintain break neck production. Technological improvements have been implemented and there isn’t much room left for increases in well efficiencies. So Appalachia might actually see a real dip in 2021 production, due to the level of production they must maintain and the fall in drilling over the last year or longer. Completions can still pick up on DUCs, but again, I’m almost certain EIA will show completions of DUCS aren’t making up for historic completions in Appalachia.

My point is…. Appalachia is going to be on the decline in production; I think it has already begun. And this will be a slow process for the area to recover from. NG will see new highs in production, but I plan to see prices slowly increase as they have slowly decreased throughout 2019. UNL. For an ETF trader, and you want to hold longer term, UNL.

Decay in BOIL will not beat near term rises in pricing, and it might get painful, but ultimately, for the effort (the amount of money required to make any) will be worth it. The % of decay is still horrendous for leveraged long sided NG ETFs. BOIL, being the last that I know of.

UNL – 50% in with an average $7.4

Speaking of pain

Covered put Profit/Loss as of market close 8/31/20

BOIL has me feeling the pain a little now. To the tune of $750 in this account. This winter could play havoc for me as usual. Keep South Central storage is your back pocket; if it doesn’t scare the market by the time LNG comes back in full force, I may adjust my 50 strike put or exit with a loss. I can always re-enter later. I know I said I set aside a lot of money for that trade, but there is no need to take a $5000 hit on my account when I could adjust and wait to see if there is a better opportunity. Good Luck