Morning Update – May 5, 2020

I’m invoking my ability to sell at 6:50est time and reducing half of my UNG holdings. My order at $13.95 did not fill yesterday because I did not placing it for after hours. I’m super excited. Though this jump is based on a surprise, I’ll take it.

Reducing UNG to roughly 18% holdings at $14.57

Pipeline explosion early evening last night.

https://www.wymt.com/content/news/Crews-respond-to-gas-pipeline-explosion-in-Fleming-County–570194971.html

This is not entirely bullish because it can cause natgas not to get to demand areas to be used. But it could also be bullish because now extra efforts have to be taken to get gas to those same demand areas and more gas will be used at compressor stations (working the pipelines harder that are rerouting the gas). As long as the gas can be delivered another route, a little extra will be used, or… possibly production will be stalled further in the mean time. I know it will add mental anguish to already hurting producers, but this incident may not actually hold up production any.

A quick google search for tetco shows images of main pipelines running to or from the Northeastern US.

a quick search for ‘eia pipeline map’ will bring up an infrastructure map by the EIA. The article says Felmming County, near Hillsboro

Energy Mapping System by EIA.gov

click on the layers/legend, remove all check boxes except for Natural Gas Pipeline (shown below)

US Energy Mapping System by EIA.gov showing natgas pipeline

I’ve circled the area to zoom into to see where the pipeline is. It is the one pipeline running from southwest to northeast, kinda on its own. It can be clicked on to show what little info they have on this pipeline.

Tetco pipeline highlighted

Looks like that’s about all I have time for right now. I have a call to go to. I can see there are quite a few other pipelines in this same area as the Tetco line, but each have fairly specific directive. Though it may be challenging, most of the gas being transported by Tetco may be able to still get moved by another pipeline temporarily.

My positions

UNG – roughly 18% in with an average of $13.08 – I reduced this morning by half of my position at $14.57

USL – 13% of funds invested with an average of $11.41 – this appears to be showing strength. Some sources with big names (Morgan Stanley) saying the bottom for oil is in. Not that they are all knowing, but it’s a good reason to stay long. I’d be interested in adding, but I’m too spread thin. I’ll wait this one out.

Placing a stop on UNG at $13.95 now on my current entire holdings. I want to ride this higher, but if there is a pull back, I want out in case there is somehow a fall closer to $13 again. Good luck

Oldinvestor

I had a moment to look at headlines… Well no shit Batman. Stay away from people out there.

Morning Update – May 4, 2020

Demand has fallen off a cliff; this is due to a drop in HDDs. A drastic drop, at that. There is more coming though. It would seem this is the best and worst time for cold to linger in the US to effect natgas demand. In a way, it’s the best time for demand to surge, helping offset the drop in demand due to the WhuFlu. At the same time, the major boost in HDDs disguises the drop in demand due to the WHOflu. I don’t really care to blame Chine for Covid19. I just prefer to say WhuFlu or WHOflu. It has a nice ring to it…

Anyway, with the drop in HDDs, back to the 10 year average, demand shows a major lacking in Industrial, Res/Comm, and in Power Burn. The market still gapped up last night; it would appear some traders are forward thinking. I can only imagine cut backs in production and news of bankruptcies and risk of further bankruptcies is is weighing on traders’ minds more than lack of demand. With the current declines in production, and potentially more declines that are coming this month, this will out ‘decline’ demand destruction in the long run. By ‘in the long run,’ I mean anywhere between next month and next year. It doesn’t really matter at this point because the major damage is already started (for producers) and will not stop until prices recover above $3/MMbtu. With most companies switching to survival mode (major cut backs on funding for new projects, and focusing on minimizing costs, just producing what gas they have), this will drastically change next year for natgas prices. I have not the tools or the time to process that kind of information. I can say with confidence that is there is a way to wipe out covid19, even with economic damage that has been done, 2021 natgas is already worth $3+. This is not the only way to bet on natgas prices, but it seems covid19 is the most profound perspective on life and everything in it right now.

I don’t have a clear point to my message today other than HDDs are disguising the true drop in demand. Demand normally declines this time of year, but the drop I’m seeing more than that. If sun spots and ocean temps are finally allowing us to have more mild summer in the US, demand will continue to be a problem for gas prices this summer. I welcome this idea, it pressures producers to cut more on spending, leaving the door open to a long position this winter and next year. Shale producers always find financial backing somewhere and are quick to recover output of natgas. In the mean time, I’ll be watching for my UNG position to fluctuate in this lower range until we find a way to crush the WhuFlu or live with it…

My positions

UNG – roughly 37% in with an average of $13.08 – order in to reduce back to 25% – order at $13.95

USL – roughly 13% in with an average of $11.41

I’ll have an order to reduce UNG back to 25% in at $13.95 again today. I’m not interested in adding to UNG unless it shows signs of falling toward $12. USL is just going to sit there a while it seems. Good luck

Oldinvestor

I feel like I should be managing more trades right now, but I’m just not in the position to do this. I know there are some good trades I’m missing out on and if I were more active on these trades, my account would probably be in better shape.

Morning Update – May 1, 2020

Loads of oil wells being shut in. Many details in the following article.

https://oilprice.com/Energy/Crude-Oil/The-Wave-Of-Shale-Well-Closures-Has-Finally-Begun.html

In the article, they are confirming what I’ve said before, that when you shut in a well, sometimes it is not capable of just being started back up. Someone had said stripper wells were at highest risk of being shut in. This may not be true. Sometimes stripper wells are the least concern, it is good for them to slow down. They are using secondary lift methods, like sucker rod pumping. Stripper wells fill the well bore with oil slowly, which is why the pump slowly. Some of these wells may die if they don’t flow them, but many will simply fill with oil, waiting for the pump to turn on again. Wells with heavy fluids like asphaltines and waxes, I believe are the wells of biggest concern. they require constant assistance to keep the well alive and flowing. Once some of these wells shut in, there may be nothing that can be done to bring the back online. A new well would be the only way to get to the same reservoir.

It should be taken notice, there is plenty of money and equipment always ready to produce quickly. I may mention this many times, don’t get too excited, shale production is quick to recover; with storage greater than normal, there won’t be a surge in pricing unless storage is below average and supply is not enough. Keep that in mind with oil or gas.

It would appear that shut-ins are having a positive effect on oil and gas pricing. Though my USL position is still behind, it is making up some lost ground. If I were holding enough USL to sell a call against the position when I bought the shares, I might even be at a profit right now. 2 hours from the time I’m currently writing this, the market will open and I’ll share an update of my DBO covered call trade.

As for Natgas, there is not serious offsetting production cuts that so far beyond demand cuts to take gas prices above $3. I’m ready to reduce UNG. I have an order in to reduce at $13.95. This reduction will bring me back to 25% in, if the order fills.

My positions:

UNG – roughly 37% in with an average of $13.08 – order in to reduce back to 25% – order at $13.95

USL – roughly 13% in with an average of $11.41

Gas is all over the place this morning. My guess is lots of news of shut-ins, bankruptcies, companies reducing spending, LNG cargoes being cancelled. Probably some speculation that summer is going to be mild, so power burn will suck… This might be a good day to day-trade, but not for the working class. I’ll stick to my sale order. If UNG swing above $14 today, I’m going to consider another reduction down to 10%. We’ll see, I’m comfortable with my current plan to reduce. I may get busy at work, and not learn anything new to persuade me to sell down further. good luck

Oldinvestor

Update on my DBO trade

Morning Update – April 30, 2020

I’m going to add some to my UNG position again. I’m buying UNG with about 6% of funds to put me roughly 37% in UNG at my average of $13.08

My positions:

UNG – 37% in with an average of $13.08

USL – 13% in with an average of $11.41

Looks like switching to USL helped reduce the pain of being long Oil. Maybe I should just go back to staying away from Oil trades since I don’t have time to really keep track. I”m saying this to say I will not be adding to my USL position. I will hold it for a while to see if the market will turn enough to provide me with a profit. I am happy I moved my money to USL, and I’ll stick with that.

As for gas, it’s just slow grind. Supply and Demand have dropped, but more evenly than I think the excited me was hoping. Also, LNG is still the bearish surprise factor right now. I keep hearing more and more about rigs laying down, capex cutting, CHK bankruptcy now. This will all put a drag on new wells, this winter and/or 2021 could be quite interesting. I’m not counting on a major lack of supply in natgas, because shale is fast to pick up the pace. Gas was over-supplied, this swing in reduced production is not a major under-supply. Since shale is quick moving, it will not get so bad under-supplied, prices go to $10 or anywhere close.

Well now I’ve gotten distracted by that job thing I have to do. haha I should get to it. No more plans to add or reduce for now. If UNG shoots up to $14, I’ll reduce back to 20% holdings again. Good luck today.

Oldinvestor

Morning Update – April 29, 2020

Still just hanging in there. I’m ready to step it up a bit on my UNG positioning. From what I’m seeing, it appears production has declined just slightly more than demand. One of the best metrics to use still is the difference in storage build/draw vs 5 year average. This is the chart I keep sharing from RonHenergy.com

EIA weekly Inventory change vs 5yr average at RonHenergy.com

This data is about a week old, but it’s compiled for you and free. As long as storage builds continue to show up below the line, this is a clear indication storage may not be building fast enough in the summer. If 2020 starts looking like 2016, this would be when things start getting exciting for bullish positioning. Don’t forget about the amount of storage that is in the ground vs the 5yr average as well. Present day storage is greater than the 5yr average for this time of year, but it’s much tighter than it could be.

Current storage difference from 5 year average for the same period at RonHenergy.com

There is still a lot of news about oil shut-ins, but there is beginning to be some noise of bullish news, such as demand may pick back up slightly. Chinese demand seems to be back to normal with the exception of international flights. With the US loosening policies on social distancing requirements, this will help; I don’t think it will yet sway the oil market. I’m hearing some news of more bankruptcies here and there. It appears that gas should still be seeing more declines due to cuts in associated gas. I believe it is time to actually increase my long position a bit more. I saw yesterday that Waha pricing in Texas has been improving. S/D balance must be returning to something of a normal market. This should mean the massive oversupply of gas in Texas is slowing more than I expected; time will tell. I am going to go ahead with another increase in my UNG position.

I’ve added to UNG to push my total holdings back up to roughly 31% with a new average of $13.08

My positions:

UNG – 31% in with an average of $13.08

USL – 13% in with an average of $11.41

I’m not yet interested in selling any UNG at $14; I believe if the price does not get to $15 soon, it may not have a chance to do so until winter. I will be watching the two charts above to judge if I should continue wait to see if prices will move higher or if I should start selling sooner. From 2016 to 2019, more times than not, I sold too soon. I’ve proven that I can control the urge to sell too soon, but now I’ve missed some moves because I’ve held the last bit of my UNG position vs selling. I want to believe eventually this small position will still pay off, mainly because I believe the market will switch to under-supplied for a long enough period to drive Natgas prices back to $3.

I wanted to share an update of my DBO trade, I will wait until 9:30est time (market open) to share an accurate account of that trade.

My DBO position as of this morning

Looks like it’s doing well. My share value is still down some, but the calls are decaying at a higher rate than the fall in the price of DBO. Very good.

I’ve been ignoring my USL position, it is down roughly 14% right now. I’m thinking oil must be finding some hope in demand recovery and supply has possibly dropped enough. Today should be interesting since it is report day for oil. I’ll just keep hold what USL I have. This same idea may have gas prices suppressed if oil production cuts are not in the spotlight anymore. Shale grows fast, just remember that. Don’t get too excite about a rally in gas. I am going to wait until late today or tomorrow to see if UNG is going to fall back to low $12s again. I”ll get more there if it happens. Today’s oil report will influence gas prices. Good Luck

Oldinvestor