The opening statement says it all, with the words “unexpected volume growth from the associated gas basins.” This means expect oil output to rise, and gas output to rise with it.
Oil and natgas prices are up this morning. I may choose to reduce UNL by another 10 shares if prices move much higher. Production is going to grow. I’m not even close to “in the know” about pipelines… Last I heard, there was at least one pipeline that was going to open up regional pricing to carry away more gas from the Permian basin. This would fall in line with what the article I’ve shared now is saying. Permian is flaring less, meaning more gas is being put into the pipeline. This could be due to the lack of wells that have been completed over the last year. Which could lead to lower production numbers, and more gas that was being flared is now being put into a pipeline. It also could be due to more pipeline capacity, which I do know of one, if need to look it up I can.
Gotta remember that regional prices, such as Waha, were lower than Henry Hub for quite some time, causing more gas to be flared. They simply didn’t have the capacity to carry it away; now they have more capacity, price may not even be a factor… If oil is high enough, the gas will simply go into the pipeline because no one wants to see it wasted regardless. Also there may be incentives from the federal government to get it sent down stream vs flare it. Production is going to rise, keeping NYMEX prices below $3.
I personally think $2.75/mmbtu is the new $3. Good Luck
Compared to the last post I made, UNL and BOIL are generating a bit of profitability between the two. BOIL’s price has slid backward, while gas has risen slightly, pulling UNL up higher.
Below is my positioning after selling 10 share of UNL. Most of my profits are still coming from trading around my core UNL position, but it all adds up. I’m just happy to see a clear distinction of some decay within BOIL from 3/25/21 to now.
So I had added the 10 share of UNL at $7.7 and reduced at $7.94 for a $2.4 gain, proving to still be the better way to make money at this trade. The decay of BOIL is working in my favor as well.
Anyway, that is all I have for now. I’m really out of the loop. I’m planning on production running too high; LNG will be stronger this summer; power burn will be weaker than last year but stronger than the 5 year average; pricing will kind of drift for now.
Here’s the latest for my Webull account. I did add the 10 shares of UNL. I’m thinking now, maybe I should have brought my holdings in UNL up to 100 shares total vs the 60 I’m holding. Now I’m thinking I’ll simply wait. I only want to make small changes and not disrupt my account balance over heavy trading.
I don’t have any previous screenshots in this similar price range to compare my holdings and account balance, so I’ll have to leave it at that.
Since I’m not planning on doing a lot of trading, I may step up all positioning, long and short to amplified the affects of the decay/interest. I will think on this some and get back to it later. For now I’m holding and expecting an uneventful summer with the exception of hurricanes and potential LNG disruptions.
I’ll end with this; the next moment gas jumps (such as a 3 day run up, or more), I’ll wait for the price to turn down a bit and add to my BOIL short position. This and possibly reduce UNL. This is about the only thing I’m planning right now.
I am still holding a large portion of the midstream equities that I posted a couple months ago. They have gone up and back down 3/4 of the up move. I will continue to hold these to make gains/dividends. A few of them I stopped out of and wish I had not, so I’ve backed up stops on the rest and re-entered a few positions. Though producers may be struggling right now, I think midstream still has a strong future, since most are fee based on flow and there is plenty of flow to go around. Oh, and it’s EIA day today. I do not trade around the EIA report, but if you do, good luck.
Here is an update of my positioning at this point. I dropped UNG a bit early… And now I am quite lop sided long on UNL. I do feel like gas could run down a bit further, and if so, it would begin to become a bargain. I’m thinking about adding to UNL. It already feels as though this summer will be about price affecting power burn and power burn affecting price. The two are more tightly intertwined than they ever have, if I’m allowed to say so…
As long as LNG and the WhuFlu don’t cause major problems, then power burn will be the hot topic. Renewables will be thrown into the discussion, because that’s the biggest growth area right now. Anyway, as I said, if LNG or other anomalies don’t sideswipe the market, Coal to Gas switching will most likely play the biggest roll in gas this summer. That being said, it could make for a boring summer.
I am personally more interest to see if Appalachian production can sustain the break-neck flow rate, all the while continuing to kill Legacy gas production change.
Appalachia Region of the EIA.gov Drilling Productivity Report
Last time Appalachia drilling slowed (2016ish), production growth slowed, but never reversed course. Stunning! Then production went on as though it was only going to double total output. Wells in this region are YUGE! What I have my eyes on, is Legacy gas production change. The amount of gas will indeed decline with time and size of the gas fields. As you gain more total wells, you will gain more losses simply due to the number of wells. But!… If you aren’t drilling/completing more new wells, then there is plateau in there somewhere.
sad to say there is a lapse in completions data for 2016/2017… I don’t have time to find a fix… I am more interested in the last few year anyway.
So except for a surge in late 2018 to mid/late 2019, completions have been mostly under 100 wells/month. Total production has continued to grow while legacy production change continued to move backward, until late 2020? why the sudden drop in legacy change? Has Appalachian production growth capacity finally hit a brick wall? Did Legacy change improve during 2019/2020 because production was squeezing harder on legacy wells and it’s going to catch up to them now? Will the sudden drop in legacy production continue much further? I want to watch these things. Other regions have the same issues to deal with, it’s just that none have been so surprisingly strong as Appalachia on a per-well basis.
Then there’s Permian, which has plenty of room to out grow the market again, if Oil producers decide to start dumping gas again to sell oil. And then there are efficiency gains that continue to happen in drilling and completions; when will that plateau?
On that, I’m out of time. I want there to be a gas shortage in 2022, and to make millions on the move. I just don’t think that will happen. Mainly because I won’t take the risk, and two, the market isn’t going to get out of control in a bullish manner. Is it good to be bullish right now? I would think that depends on your scope of the market. I’ve backed up and become more macro. Maybe I’m just using that as an excuse to stay bullish. If I stay bullish long enough, eventually I’ll be right! If Appalachian production finally plateaus, I might just be in luck.
Oh, and I want to add to UNL today, but the market continues to see new lows, so maybe add 10 share of UNL today, if I can get them below $7.7/share. I don’t want to add more than this, as the market may go to $1.5 yet. Taking it slow and boring! Good luck
First, here is an update of my positions and account balance. My account balance is suffering along side the weakness in natgas pricing.
I believe there has been strength in production, and this is not going away as oil is back to driving associated gas output higher. Already! It is apparent that even a slight increase in production is not welcome. Prices were below $2 a year ago, so the deficit to the 5 year average is priced in. It’s been a year… geez
UNL will be below $8 today, I am a buyer.
Instead of buying UNL, I am exiting UNG. I am shifting away from shorting UNG, and more toward BOIL. The hard to borrow interest is far higher with BOIL than UNG, but so is the decay.
Since UNG has a tight Bid/Ask Spread, I exited now, at $9.47/share.
Now I’ve exited UNG, I will hold here for a bit longer. If the natgas prices continue to tumble, I may exit BOIL. The original plan was to hold the short position longer term, but some opportunities are too good to pass on. Instead of increasing UNL, I will reduce BOIL. It will be a while yet. As for today, no more moves. I’ll wait now. Good luck