Morning Thoughts – Canadian Imports are Strong, but Exports Stronger.

I don’t pay close attention to Canadian natgas imports, but they seem to ramp up when US production gets weaker, or there is high demand in the Northeast US. Right now seems more of strong demand in the Northeast US. These increases in imports are usually somewhere around 1Bcf/d- 1.5Bcf/d. Even with the increase in imports, this doesn’t come close to the supply deficit of the overall picture. Storage vs the 5 year average showed a reduction of 38Bcf for week 43, based on the EIA report yesterday. This is part of a strong trend that is occurring regularly, thanks to strong LNG exports.

Weekly Storage in relation to 5 year average at RonHenergy.com

We can see that storage is catching up to the 5 year average. For the foreseeable future, this will be the trend, and there is little that can change this. Week 44 is already in the books and will be more of this, only much stronger. So the next leg lower will be a much stronger slope downward. The market already knows this, but prices are holding accordingly.

I would like to think the market is somewhat back to normal. Most factors are holding steady, like LNG is strong and should (for a while), stay this way. Hurricane season should be about over… Winter has shown up a bit early (for a few days anyway), and natgas will have an early draw on storage. If this decline of storage continues at this pace, prices will rocket past $4 until something drastic changes. There will be no point in talking about power burn conversions to coal. This won’t be enough to alter demand during winter. Either production must come back online soon, or LNG needs to get crushed again. These are both likely, but I don’t think they will happen before $4 gas is seen. That’s my personal opinion.

My positions as of 10/30/2020

So other than oil crushing SLB and SLB crushing me, I’m doing pretty good. KOLD is making up for SLB, and then some. Not to mention, KOLD has made up for the lack in SLB at a relatively quick pace. KOLD is now at 50% of max gain. It is a general rule by many options traders to look at exiting a position at 50% of max profit. I think covered calls/puts are a little different, as the objective is a little different. I’m trying to capitalize on decay or the underlying, which is a much longer term goal. This would mean holding the position longer; with strong whipsaw moves, I may want to exit and look to re-enter….?

If KOLD happens to swing low enough for me to exit at 50%+ of my max profit, I will take it. I don’t think it will happen today, maybe next week. As for SLB, I believe I’ll be waiting until next week to consider any changes to that trade as well. I would like to see it recover a bit, maybe $15/share… UNL, I’m holding forever of course, and UNG, I would like to see $13. I hope your weekend is kind to you.

Oldinvestor

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