Morning Update Feb 24, 2020

Oil and Gas and the rest of the world are down this morning. Fear is very much the driver of this market. Italy is now under the coronavirus spotlight. It appears the virus can spread quickly and does pose a greater threat to life than “The Flu”. This is certainly reason enough to try and contain the virus, but it seems it’s going to get out regardless. It spreads too easily. One reason that just occurred to me, in order to prevent mass panic and such, is to slow down the spread. If the entire global healthcare community is overwhelmed at the same time, this would mean global panic. Even if the virus spreads, as long as it is slowed, hospitals and healthcare workers can continue to do their jobs without the panic.

As for other factors. Fundamentally, the market is the same as it has been, on track for production to slowly decline, demand is holding its seasonal pattern with no real disruptions. Weather is stupid and only influences the market withing a certain range anyway, with the exception of a blizzard when storage is already unseasonably low. That isn’t going to happen any time soon. Outside of potential LNG disruptions and virus outbreaks, the market should hold where it is. Unfortunately, I believe there will be more of both coming. I am not so worried that I am holding UNG, but that I am out of sync with the market movements because of this new layer of complexity.

That’s really all I have to say this morning. I’m not worried, but maybe a bit bummed. There is going to be a swing, there always was going to be a swing… Only now, I don’t know how to time it. What makes sense to me now is to keep my position smaller than I was expecting. I’ll hold with 50% of funds in UNG and not expect a lot, just try an manage potential risks. My plan before this virus issue was to be all-in UNG about now and playing UGAZ back and forth some while natgas moved around in each range. I’m not a fan of moving UNG in an out of the market like UGAZ, it just doesn’t make enough with the smaller % of funds dedicated.

Again, I’ll be holding on to my 50% of funds invested in UNG, I am still waiting for a fresh opportunity to add or reduce. I’m all but certain the wait will be longer than I was ever planning to reduce. That being said, I should also wait longer to add to my position as well… I may run out of ways to talk about this market, but I’ll still be here, doing my best. Good Luck


Morning Update Feb 14, 2020

First off, weather is predicted to have cold coming in, and prices are suppressed. The current weather forecast is showing some of the coldest days we’ve seen this winter. Why aren’t prices responding by rising. Maybe by Monday they will. Remember, this market has been slow to react to anything, especially anything bullish.

I have to say I’m sill nervous about the coronavirus and the effects it having and going to have on the global LNG market. The focus, of course, is still on China. I just saw an article about European prices falling “Nobody Can See Bottom for Europe’s Plunging Natural Gas Market” at Bloomberg. This is not directly related to the coronavirus, but it all fits together if it’s all occurring at the same time.

Though I’m nervous, I am not panicked. I’ll continue to hold my 75% of funds in UNG, but I will not be adding until I have some sense that LNG exports are not going to slow. All the talk of how “Chinese buyers of LNG have to take gas or pay” doesn’t mean much. These contracts of “take-or-pay” is not on the entire amount that is being delivered. Say 80% is take or pay. That means 20% of exports could stop. Also, if they choose to pay and not take the gas, that still shuts down exports or at least leaves them looking to redirect somewhere else. All of this comes down to the fact that LNG exports will slow by some amount, and NG pricing will not respond to that well.

I may be getting the cart before this horse with this coronavirus/LNG idea, but I am still holding long. If by some chance I am dead wrong, prices go, and my account will go up more slowly than I was expecting (I was expecting to buy UGAZ and keep that in play more). If I am right, prices will fall further; probably not all at once. A fall in pricing can creep up on a traders and before they know it, they are down 20%+.

The day there is a cure/vaccine announced for coronavirus, on the market, and proven to drastically slow/stop the spread, I’ll be ready to drop all this. I did read Inovio Pharmaceuticals, Inc. (INO) had developed a vaccine in about 3 hours, but I guess it takes like 3 months or more to get it to market.

Aside from all that, US production is still, slowly weakening. Any disruptions caused in LNG should cause prices to fall further. At that point there will be more bargains to be had. I would simply rather wait to see if those bargains do show up.

For now I’m holding my current position in UNG at 75% of my funds, I most likely will not make any moves today. Good Luck