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

Morning Thoughts – Too Soon

I took a chance and was too soon. Gas demand is getting crushed, and the forecast is not helping. I’m getting the feeling there is more Covid relate demand destruction within the US than I know. Even so, the near worst scenario for weather related demand is still using more gas than the 5 year average.

Weekly Gas storage difference vs respective 5 year average at RonH’s Tableau page

Now this would not have been possible without LNG being and staying at all time highs. As big a hole as there is in Production and jump in exports, I though surely the market would finally get a big boost. And it has in that way, but something always shows up to crush it. There is still a good chance we follow that 2016 curve of storage vs 5 year average and drop quick with any amount of winter weather.

Screenshot of my Webull example account pre-market 11/16/2020

I don’t have access to my spreadsheet today, so I will share this instead. UNL is showing a large gain that will be cut in half. SLB is making up for it currently, but the options will drop a bit at market open as well. Also, my KOLD covered put will be hurting a bit as well. So back to the low point of last Monday.

So I was thinking with the unusually bearish weather, I would catch a break in the market that would last, yet here we are… It’s the threat of bearish weather, and drops in power burn, signs of increasing production that has natgas on edge. This week’s EIA report will be for week 46, which is normally a draw. So with a storage build expected, and demand continuing to be weak, these natgas prices are warranted.

I’ll be holding my positions and not adding or reducing yet, and hoping LNG holds. Any news of LNG stopping, and prices will get crushed again. Any news of bullish weather, and prices will go for another ride higher. Waiting it out. Good Luck

Oldinvestor

Morning Thoughts – The correct EIA report day

So today is the day the EIA report will be this week. EIA used to push report day from Thursday to Friday when a holiday fell the in the same week. Then they stopped doing that. Veterans day fell on Wednesday, so maybe that is why they pushed the report back this time…

Anyway, I shared a screenshot yesterday, inventory vs Total Degree Days. I don’t have time to explain TDDs, but here is a basic explanation from the Nation Weather Service.

https://www.weather.gov/ffc/degdays

Weekly Inventory Changes vs TDDs at RonHenergy.com

RonHenergy.com is down right now, so I’ve shared the link to his tableau public page for this chart.

So my point about the screenshot above. It has nothing to do with weather… It has everything to do with non-weather related factors, such as exports, lack of production, and even some power burn. Weather related demand will still effect demand swings from one week to the next. This chart is showing a similar trend, as previous years, just in a different range. 2018 and 2019 become more and more oversupplied, and 2020 this reversed the trend. Now this chart would express drop in the ability to build inventory by roughly 50Bcf to 60Bcf per week. This is 7.14 to 8.57Bcf/day.

The main thing that could screw up my permabull status is a crash in LNG exports again. At least that’s the most likely to occur in my opinion. There really isn’t much else to say. I’m long and staying long until LNG backs up or else drastic happens that causes me to dump and run. I have said lot about production coming back online, and this is also likely, it will be limited and slower than if LNG exports where to crash.

my positions as of pre-market 11/13/2020

For now I’m holding all positions. Natgas prices are higher this morning, so UNL should move a bit higher. I’m wanting to see much higher. It will take help from weather related demand to get the price I want soon. So the EIA report is actually today at 10:30est. Traders are most likely sizing up on the chance of another draw. Ron H had posted some info on Twitter that makes me think today will be a inventory build, so I will be happy to see anything but.. Good Luck. I hope the weekend is a good one.

Oldinvestor

Also, I hope to be updated my BBB strategy closer to the end of the day. Check it out here.

Morning Thoughts – EIA report day

Correction: EIA report is tomorrow. Most likely at 10:30est time

Today’s EIA report may not be sooo much more important than any other, but it may be perceived that way. Since there has been such a slump in weather related gas demand recently, the EIA report is expected to be on the fence. Lets break it down.

So you could take HDDs + CDDs and add them up for the week that the EIA report will be about. The storage weeks go from Friday to the next Thursday. Oct 3, to Nov 5, I Averaged 15.1 TDDs by the chart below. This would be for week 45, which is what EIA will be reporting for today. We already know the HDD+CDD for week 45 in advance, because that information is more up-to-date and free to access from National Weather Service ( I think).

HDDs + CDDS for 2020 at RonHenergy.com

I didn’t realize until now, Ron has already done the averaging in this next chart I’m sharing below. Ron is also showing 15.1TDDs for week 45. That makes life a little easier.

CDDs+HDDs per week at RonHenergy.com

So now you look at the next chart and compared to last year to get a rough idea of how much demand there will be for the week based on the average HDDs+CDDs (=TDDs). Ron hasn’t updated this scatter plot for week 44. I’ll pester him about this later.

Anyway, RonH has done the hard work for us again and has a scatter plot (below) showing inventory changes vs TDDs.

KEEP IN MIND: This is quite rough and anomalies happen, like the EIA doesn’t always report what you expect based on your figures. Don’t try and day trade, expecting a draw and a big jump in price.

So according to this chart, I’m seeing a slight build for this week. The white line isn’t going to be perfect, but it gets us closer. And if you take the slope of 2019, and the 4 data points from 2020, this week will clearly be a draw.

All this proves is that the EIA report will be close to 0 and we should expect a small draw or a small build.

Inventory Draw/Build vs TDDs at RonHenergy.com

I will be holding long, and hope to see a draw. How about a draw of 1 or better. If you were to look at the top chart again, you would see the there are some strong TDDs and some weak TDDs for week 45, and then also for week 46. Week 46 may actually be more bearish than week 45…

What is most important here.

Storage draw/build vs 5 year average for respective years. Found at RonHenergy.com

The important part

What is important to me is that even with weak demand, storage is swallowing up this surplus is chunks vs the 5 year average. This will be what preach until production recovers substantially or LNG crashes. I’m already thinking about tomorrow’s post, I’m out of time for today.

The chart below says it all to me. This would be hard to scrutinize right now. I’ll hammer on this tomorrow. on to my positions..

Inventory change vs TDDs at RonHenergy.com
My positions as of pre-market 11/12/2020

Looks like SLB has gotten a reality check back to $17.40, this is actually a good thing for me, as it will slow down SLB some. Either way, I will most likely be holding onto my covered call for SLB until the 12/4/2020 expiration or very close to that date.

UNL and UNG are looking nice. At this point, I plan to hold where I am into next week. Even if there were a pop today, I would not even attempt to day-trade it. I’ll simply hold for that storage surplus thing to vanish. You know, that thing I keep rambling about. EIA report is at 10:30est time. Good luck.

Oldinvestor