Morning Thoughts – Short Term Demand Strength vs Long Storage Surplus

If prices don’t break higher soon, they aren’t going to without the storage surplus shrinking. Granted, blizzard like conditions can cause prices to spur. So there are two things… One is generally short lived (very cold weather), and the other is slow and steady. It was pretty damn cold this morning, but who knows how long that will last.

So bitterly cold weather isn’t needed to shrink the storage surplus, but it helps. Also prices aren’t going to get too far ahead of a shrunken storage surplus, except maybe once per winter, and this has kinda already happened.

weekly storage surplus/deficit vs prompt pricing at EIA.gov

All this doesn’t mean that prices will stay below $3 for all of winter. I’m thinking it’s just going to take a while, even with cold weather. But… cold weather will certainly help shrink the storage surplus, along side the lack in production still. I don’t feel I’m clinging to anything here. I’m just pointing out that stronger weather related demand is an added bonus to the weakened production to help shrink storage.

My money is on the principle that production stays just weak enough and weather stays just strong enough for prices to creep higher be the start of the new year. I hope to be done playing UNL long term and switch back to more swing trading. Maybe even shorting BOIL. Granted, I will short BOIL if the price will ever jump.

What I’m holding now

My positions as of pre-market 12/1/2020

Holding steady with UNG/UNL and the 1 KOLD covered put. I feel like now, I shouldn’t have sold such a long dated expiration put. It’s in and I’m just going to sit on it. Of course, I should have remembered to cover the trade three Friday’s back for 50% max profit. You win some, you forget to trade some, you flat out lose some. I’m still winning, just going to have to ride that one out.

Yesterday I had considered dropping some UNL to shift more toward UNG on a dip. I decided I will hold and just buy more UNL on a dip, but it will have to be a large dip. I’m afraid UNG is the better choice right now, as gas is going to probably ping-pong around until storage gets swallowed up or doesn’t. Production is the key element. It doesn’t matter what vendor your data comes from, just watch out for an increase from recent highs in production output. Each time production increase, the lid on prices gets dropped lower.

This is how I see it.

Cheeky representation of fundamentals vs price potential

I’m holding my positions for now, that is all. Good Luck

Oldinvestor

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