Morning Thoughts – Oldinvestor

UNG will be starting it’s roll from November to December contract today. BOIL has rolled to January contract. This will have some to do with UNG being down more % wise in pre-market that BOIL. I said I was interested in rolling out of UNL, and into UNG. I think I’ll wait until later this week. If UNG gets hammered because it is still in November, and it’s rolling out of November… I don’t want to take a hit, just to not be able to see a return by rolling into December. December will still see some action, just not like up to this point. There is still a storage surplus of 444Bcf over the 5 year average, but that number is about to start shrinking. As long as LNG stays strong, storage will obviously shrink faster.

Anyway; I don’t believe there will be a last scary run on storage for South Central. Henry Hub cash price is cheap, which is the reason for November staying priced so low. Which all this goes back to storage being so full and having little room left. All-in-all, I’m waiting to get into UNG until hopefully later this week.

Positions as of pre-market 10/14/20

For me, it’s not as much about where the market is, as much as these ETFs needing to roll away from November contract. As for are gas goes, it will be strong up and down still, until there is some confidence of storage getting consumed fast. This should send prices higher accordingly. I would like to think we will see $3.5 for Jan contract before Christmas. If Supply and Demand remain where they are now, storage is going to be consumed at a fairly quick rate, even if winter doesn’t turn on the cold air. Mostly because production is now at a 2 year low. I’m kinda blown away by how much I’ve seen in production declines. Though, let us not be fooled into thinking it will not return quickly if prices get close to $4.

Speaking of $4, I think this is not out of reach. Storage needs to get back on par with the 5year average and then $4 is the target if supply/demand is still on this similar path. I’m almost interested in BOIL at this point, but one step at a time. Let’s see if the market decides to tumble this week, then I will think more about UNG/BOIL.

I’m happy to hold what I have for now. Seems like I rambled a bit this morning, sorry for that. If you didn’t catch it yesterday, I’m going to start looking at the EIA Natural Gas Storage Dashboard for help with pricing.

Storage vs 5year average vs price

This shows the history of gas storage in relation to 5year average and prompt pricing. It’s perfect. At $2.7ish, price wise, there is room in either direction for gas, with a storage surplus of 400+Bcf. There is still room for prices to move as high as $3.5. I have a strong conviction of this once storage is on the draw vs build each week. Look at 2017 dots, storage is about to enter that range; prices for winter contracts already have. This really says life will slow down a bit, but I also won’t be concerned about losing my shirt in UNG because of inverted pricing. Did I mention all LNG facilities are flowing gas! So hurry up and wait. Good Luck