Morning Thoughts – LNG going strong

Looks as thought Sabine Pass and Cameron LNG export facilities both have tankers docked and probably loading up. LNG pipeflows are at a new recent high. Prices are soaring. 8.27Bcf/d according to RonHenergy.com This would imply, at current production levels, that the natgas storage surplus will get used up by the end of winter if not sooner.

There is presently a 353Bcf surplus of gas to the 5 year average according to EIA.gov. We are currently in week 42 of the year, and we have until week 13 before draw season will end. Not that the timeline really matters, but it is a good target to start with. Anyway, this would be 23 weeks, or roughly 160 days from now. To reduce 353Bcf to 0 in 161 days, this would only take 2.2Bcf/day. The US is currently consuming/exporting barely less than last year right now (sorry for being vague, I can’t share numbers that you must pay for). If we look at RonHenergy.com again, Ron is has all the numbers by EIA.gov

Year over Year comparison for week 41 2019vs2020 at RonHenergy.com

The above table is just a comparison for only week 41 from this year to last year. You can see Power Consumption (power burn) is -5.1. This can swing wildly with weather changes from week to week. So it is best to just look at storage changes themselves.

Weekly Natgas storage changes vs the 5 year average at RonHenergy.com

click the image for a larger view of the chart. This shows the change in storage vs the 5 year average; week 41 is the last dot plotted on the white line for 2020. There was a large drop from week 40 to week 41; power burn being so strong vs last year has a lot to do with this drop. But if not for weak production numbers, this would also not have been possible.

If production continues to be weak and LNG continues to stabilize above 8Bcf/d of demand, then the storage surplus will be wiped out very soon. Correction; we are in week 43, and the EIA will report on week 42 tomorrow. But in week 41 you can see there was a drop in storage vs the 5 year average by 41Bcf! This is insane. If there were to be 41Bcf more gas consumed than the 5 year average for the next 23 reports…. This would leave a deficit of 590ish Bcf! Just by end of draw season! Why did I reduce UNL?

Remember that power burn helped as well, which won’t always be the case. I highly doubt there will be a storage deficit of 590Bcf by the end of winter, but it is possible. There are even stronger consumption periods on that same chart. I can accept that winter may not bring a lot of cold to boost winter demand, and I can accept that production may improve some. Even at that, the storage surplus/deficit will depend upon LNG continuing at the pace it is being exported. That requires a global look at storage and I don’t have time for that. All in all, there is still a strong bull case scenario here, even if there are many hiccups along the way.

My positions as of 10/21/20

My Webull example account is still about $75 in the hole since I started it and started sharing trades from there. You think if I were so good at trading gas, I would have performed better. I took way too big a bet, way too soon and it hurt me. So if anything, you might have learned that you shouldn’t take such big bites all at once (or at all).

I am planning to hold were I’m at. I believe UNL has another $0.50 to $1 to move higher by spring of next year and SLB will stabilize at soon enough for me to work that back into a profit. I think what I am going to do today is purchase 10 more shares of SLB.

SLB on daily chart at Webull

This chart won’t let me draw on the RSI indicator, but it has a double bottom that has formed. It might be worth a little extra with a stop just below the recent lows of $14.90. So how about 30 shares. 10 shares just isn’t enough influence, and I can afford 30 without any problems of margin or pain as long as I use that stop. Good Luck

Oldinvestor

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