Morning Thoughts – Moving in vs Moving out

What I mean is, when storage is moving away from a surplus, pricing will be affected differently than when storage is moving toward a surplus. Lets dive right into it.

2015/2016 is a great example of what I’m getting at.

Storage surplus/deficit vs pricing at EIA.gov

You can click the image to view the full size or click the link to go to EIA natgas energy dashboard.

In 2015, prices stayed capped, yet there was less of a storage surplus than in 2016, when prices broke out. It’s very simple; In 2015, the market was anticipating a surplus, therefore prices suffered. In 2016, the surplus began to dissipate and prices surged in anticipation that storage would swing to a deficit.

Now fast-forward to 2019/2020.

Storage surplus/deficit vs pricing at EIA.gov

Again; prices in 2019 stayed mostly suppressed in anticipation of building a surplus. Right now prices moved to the upper end of the price range due to excitement of storage moving away from a surplus.

It’s about anticipation. The market players believe storage is moving to a deficit, and for a moment, a deficit was coming in fast. This changed last week when demand was weakened due to weather turning more mild. Also, in the longer term, higher prices have caused power burn to move away from natgas, toward coal and other sources.

So this is the focus…

2016 and 2020 Gas storage vs respective 5 year averages at RonHenergy.com

In 2016, prices dumped in November when storage began building a surplus, and began to climb in December when the storage surplus started to disappear fast. 2020 is showing a fast fall in the storage surplus, and this week’s EIA report will still show a drop in storage vs the 5 year average, but it will be greatly slowed compared to previous weeks. Storage is still very high, such as East storage being at 96% capacity. So prices have dropped for good reason.

The below image from a free Bluegold article on seeking alpha. They seem to have posted an updated article after I posted this image. This image points out the projected weakness in demand for this week, and backs up the idea of weaker pricing. Next week; however, should return to more the norm on the demand side of life for natgas. Prices should at least stop free-falling, and possibly even turn around.

https://seekingalpha.com/article/4386016-natural-gas-market-weather-related-consumption-already-reached-major-low-and-is-now-expected

I’m so busy… I’ve got to cut this off. I’m heavy long on natgas. I think this period of weak demand will pass soon and natgas prices will be back to chasing after $4. I feel it’s a good time to wait to see what happens next. I’m using about all my cash that is available in Webull without dipping into margin. I don’t want to risk more than this amount so I’m holding here.

My positions as of mid day 11/10/2020

Let’s see what happens. Good Luck

Oldinvestor

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