Morning Thoughts – Waiting…

With storage still recklessly near full, and now draw season has been flipped from one of the earliest to one of the latest… Of course prices are reluctant to rise. Everyone is talking about weather… Bla. Weather does poses the power to swing demand from one day to the next more than any other factor.

I’ve preached this enough. Rolling back to 2016.

EIA natgas storage surplus/deficit vs pricing for Nov 04, 2016
EIA natgas storage surplus/deficit vs pricing for Dec 1, 2016

In 2016, there was an increase in storage surplus from November 4 to November 25, yet there was also an increase in the price of natgas.

Daily price of NGZ16 and NGF17 at Tradingview.com

The EIA is reflecting some price jump due to changing from Dec contract to Jan. Much more than this, there was a large increase in pricing between these two dates. This was due to a large incoming cold spell that was to swallow up the inventory surplus and actually create a deficit to the 5 year average. The reason for the increase in the surplus during this same period as prices increasing, the EIA is behind a week and the forecast was calling for extraordinary cold to come. So bearish weather drove demand down, which drove pricing down, and a flip in the forecast along side a forward thinking market that drove prices back up before the surplus was swallowed up.

Daily CDD+HDD vs Long Term Average of 2016 at RonHenergy.com

It looks as though the cold didn’t come until almost mid December, but the swing in HDDs was from extreme bearish to extreme bullish. Of course the market dropped after this big swing thanks to more weak demand.

Daily CDDs+HDDs for 2020 at RonHenergy.com

Since I’ve watched Natgas play out for almost 5 years now, it seems the market is more complacent or just simply waits longer for evidence of anything these days. Anyway there has been this extreme bearish moment for demand, followed by more neutral HDDs, but the forecast continues to disappoint. This, along with storage in the 90th percentile, is a bad combination. I keep in mind how quickly things can change.

My positions as of pre-market 11/18/2020

I’m back to my normal duties today, holding some pretty horrible positions now. SLB is looking like it’s time to exit. Of course I shouldn’t have rolled the call down to 17, but that’s hindsight crap, the trade still did well. $65 gain is sizable for this account. I will be looking to try and exit SLB today, and will continue to hold all other positions. Good Luck

Oldinvestor

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