Morning Thoughts – More pain coming

It looks as though UNG could tumble to $8.5 or lower this week. Just have to wait. My least favorite time of year. I have to change this about myself. seems like I’m so good at getting on the wrong side, I should just go completely against my own advice? Maybe I’m just remembering all the bad moves? I can’t be too hard on myself as I saw green to start the week last week.

Storage change vs 5 year average storage change for each week at RonHenergy.com

So how could storage go from beating the 5 year average like crazy to the total opposite? Weather and lack of power burn. Lack of power burn can also be linked to weather. It would seem prices are moving consistently with the changes in weather. One might assume this should also be true when weather improves. I will admit it is an uphill battle with storage still to a surplus to the 5 year average. The battle keeps getting harder mentally as storage isn’t swinging closer to a deficit.

I think I’ve mentioned this recently; we get seduced by one early swing in storage from strong weather related demand. We begin to think winter is going to help the market out in a bullish way and forget to look at every bit of data to scrutinize the move in prices. Even when the data is from the EIA, shared for free on RonHenergy.com It is still very useful data.

My positions at of pre-market 12/7/2020

So I sit and wait. The original plan was If UNG falls to $8.5, to roll 50 shares out of UNL and roll those funds (roughly 40 shares) into UNG. It’s getting close already. I think I’ll wait. I may miss the opportunity, but I’m going to wait to see if things get ever worsererer. Gas could fall further.

Why am I long? same argument. Production is crazy low, drilling activity is crazy low, making a case for future production stay crazy low/lower. I got the cart a bit ahead of the horse, as usual. Weather looks terrible… OPEC has agreed to something to cause oil prices to rise. This might allow oil production to increase, allowing associated gas to get back to pre-COVID levels if it is not currently. You can get a lot from the EIA drilling report.

Areas such as Haynesville and Appalachia have very big wells. It’s easy to tell by the low number of rigs and high amount of gas produced in those areas. These big wells live much longer and take longer for production to start dropping. You can see back in 2014/15/16, when everyone else was dropping production, Haynesville and Appalachia were moving sideways and then higher again quickly. If these two producing areas start decreasing production, and drilling rigs haven’t increase back to pre-COVID levels… This, to me, is good reason to stay a bit long biased. Then couple that with Extreme LNG exports… All I really need is for weather to stop being horrible.

So storage is still against me and that is all. Take what you can from this. I’m going to sit on my hand and try to focus on something else while I watch periodically. Good Luck

Oldinvestor

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