Morning Update March 4, 2020

I don’t have much time today. The one thing that stands out right now is a drop in production. HFI Research mentions a drop in the Permian area due to negative regional pricing. https://seekingalpha.com/article/4329329-natural-gas-bearish-weather-persists-production-drop-in-permian-starting-to-get-meaningful

NG1 on 2hr at Tradingview.com

I’m showing a bit of a breakdown. Pricing has broken away from the up trend some, and RSI showing some slowdown before the break. This is more to do with the coronavirus and the interest rate change yesterday afternoon.

I’m torn on whether I should hold or reduce a little. By a little, I mean 5% of my funds. My current break-even price is $15, If I were to reduce by 5%, I would scrape a small gain (less than .5%) and my breakeven would bump up to $15.05. I’m going to hold.

I feel the market could move in either direction from here. If production is going to slow by 1Bcf/d, this should help support pricing. Winter is over, and I believe no one is considering that anymore. Storage figures still matter (which weather does still affect), and the market is very close to being balanced in relation to the 5 year average, even with terrible weather figures. A 1Bcf/d drop in production from this point could tip the scale. But production doesn’t just drop 1Bcf/d and stay that way.

I’m going to hold my 75% in UNG. If prices do not go up today, I’ll reconsider dropping 5% of funds. For now I’m holding. I forgot to mention earlier, I’m placing a limit order on UNG to sell down to 50% holdings at $15.05. I’ll be reducing 25% of my funds in UNG. Good luck

Oldinvestor

Side note: I’ve bought ZM (Zoom Video Communications) with 1% of my account in my 401k account. They report earnings today after hours. I’m not expecting earnings to jump. Most of the time companies include expectations of future revenue, this is what I’m expecting to be big news. The company I work for just cancelled some flights to some location that I’m probably not supposed to say. I’ve heard many Walmart buyers are not going to China right now. I think ZM has been and will continue to reap the benefits that only a video conferencing software can reap from the coronavirus a little longer.

Morning Update March 3, 2020

First up, something to think about. I found this article yesterday at Oilprice.com: Shale Drillers Need A Miracle To Keep Production From Falling. In a statement by Olivier Le Peuch, chief executive of Schlumberger, “Shale production growth will go to a new normal … unless technology helps us crack the code”. I feel this statement is all encompassing to the oilfield. There will be the Permian exception, but they have their limits as well. As a whole, I believe Mr. Le Peuch is under the impression that production growth is going to be quite the challenge from here on out.

This statement by Le Peuch supports my focus that producers are running out of efficiency increases. So producers go after their best wells first, using the best technology they have available. Producers flood the market, and just as the demand catches up to supply, the best wells have already been produced… I know there is more to it than that. I know greed drives operators (producing companies) to produce as much as possible while prices are up, causing an oversupplied market. Horizontal drilling and fracking into shale discoveries has simply made it easier to overproduce oil/gas. This all happened in 2015ish, the natgas market was much smaller at the time. Overall production has grown approximately 30% from the beginning of 2016 to the beginning of 2020. This increase is now the standard, now that demand has caught up.

The question going forward is can production keep up once demand growth finally surpasses supply. In the near term, without a doubt. I don’t believe Le Peuch’s statement strongly enough to say next year gas prices are going above $6 or whatever… I think he is simply saying this is coming. I’m sure he’s looking at long term projections for his company. The truth is, production would still be growing, had prices supported the idea. There is still plenty of gas in the ground, and with horizontal drilling and fracking, it’s easy to get to. My efficiency argument is only so strong. Over the next 10 years there may exist this shift to oil and gas production reaching a plateau where it is just not feasible to produce any faster. Between now and then, prices will still fluctuate as they have the past 10 years. This is what i truly believe. I do think production is about to hit a lagging period. Operators have cut back a lot on spending for new wells and demand growth may have slowed, but is still fast enough to cause another 2016/17 swing in pricing. Then we will repeat the cycle again, but with small variations. For example, next time production ramps up, it may not increase by 30% in 4 years. Next time production ramps up, LNG demand may or may not be growing.

Time to get to work. I’ll stop here. I’m still have 75% invested in UNG. It would be nice to see $15 this week for another reduction back to 50%. That’s all I’ve got for now.

Oldinvestor

Morning Update March 2, 2020

I have not posted any updates to my other website, Escapeautoworks.com. I was able to get some work done on my truck this weekend. I’m prone to hibernating in the winter. I hate the cold; like 50 degree F cold. There’s nothing quite like that sense of accomplishment from physical efforts.

Anyway, ready for new round of coronavirus panic and LNG drama. Glancing at data, everything looks about the same. I would imagine it’s safe to say production is not going to increase for a while. Also, there is always the theory that production gets so far behind on planning new wells that the market will temporarily struggle with under supplying demand.

I haven’t seen anything new as far as actual cancellations in LNG exports, but I did find this: Train 2 Of Cameron LNG Liquefaction Project Begins Commercial Operations Train 2 is part of a plan to have 3 trains for that particular facility. Train 3 has a completion date sometime in the second quarter of 2020. My guess would be closer to July. We’ll see…. With new expansions of LNG export facilities should also mean more contracts to ship LNG.

One more key article for the immediate would be this one: Sempra says coronavirus outbreak has not hit talks with LNG buyers. Basically Sempra is making a statement that they plan to continue operations as planned, and have not had any disruptions.

Outside of that good news, weather seems to be quite bearish after the next week of cold. Winter never really came, and not there is no real good reason to even consider it until June or so. I’m going to stop mentioning weather unless there is something worth mentioning.

As for my positioning. I’ll never get time enough to work on all that I want… I have shifted my strategy to be more cautious on the long side. I’ve said this before, but I’ll go again quickly. My original plan was to be fully invested in UNG around $1.85, leaving plenty of room to roll into UGAZ. I did get a small amount of UGAZ, and capitalized on some small moves. The coronavirus, along with drama in the LNG market has prompted me to adjust my strategy to be more conservative. I will remain long in UNG, but now I want to wait and see if the market will get to $1.5, and threaten going lower. I know this is a drastic shift in strategy, but there is too much unknown still about the Coronavirus. My off the hip analysis here is that the market is going to remain in the range. Speculative buyers would normally be bargain hunting at this price, but there is too much doubt in the market. I believe the market could respond with another few cents drop with more news of LNG cancellations. I believe the market is nervous of the chances of this happening.

I’m currently holding 75% of my funds in UNG with a break-even of $14.99. I’m showing my account is down about 7.7% from inception. I’ll be patient for NG pricing to get to $1.5 before adding to my position. Also, I want to reduce at, or very close to my break-even price. This is always subject to change, but that is my baseline strategy for now. Good Luck

Oldinvestor

Morning Update Feb 28, 2020

It’s time to buy. I would have bought this morning first thing, but I’m trying to make my purchases withing the 8am-8pm eastern time window that most people have. In Webull, I could have bought up some UNG below $13. NGJ20 went below $1.65. NGJ16 was the contract that bottomed out at $1.61. NGN16 bottomed out just below $1.95. NGN20 is currently $1.89! I wholeheartedly believe, if the coronavirus continues to take its toll on markets as a whole (which it looks very likely at this point), that Natgas pricing will reach $1.50. This is not so far away. Now the initial shock of the virus is currently upon markets this week, and that will soon pass. The true economic impacts of this virus are still unknown. What I like about natgas, it’s easy to manage. I’m talking about the physical gas. I would think natgas would be the preferred source for heat in tough economic times, because it’s easy to manage physically. Power plants…

https://www.wsj.com/articles/utility-jobs-shrink-as-new-power-plants-need-fewer-workers-1516021200

This above article is just one that I did a quick search on google to confirm that power plants require far fewer employees to operate natgas powered electric generation vs coal powered.

I keep getting interrupted… My mind is scrambled with work this week. I’m adding to my UNG position with 25% of funds at $13 to put me at 75% in UNG. I’m going to publish this now and try to finish this post later.

I cannot seem to find time to get down what I want, nor can a focus for the VIX begging for our attention.

My line of thinking right now is to stay long UNG and be all in if prompt NG contract hits $1.5. Anything below that and the market should get a little crazy. I’ll buy UGAZ if natgas will dip below $1.5. This time period is certainly stressful, but can be exciting and can produce profits. I have to stay on course here. UNG has been good for my account. Though I’m down nearly 10% in my account, the opportunities to go long are ever increasing. Good Luck

Oldinvestor

Side note: Can’t make up my mind if I want to trade a spread that the panic will worsen or just that it won’t recover so quickly. IV may make the decision for me. I’m not so quick yet, but the opportunities are rolling in this morning.

Non-Morning Update Feb 27, 2020

Today has not be kind to me time wise. I’m in the middle of a project and not much time left for Natgas. I’m still holding steady with 50% on my funds in UNG. Big decision time. NG prices are at fresh lows, should I add to my position?

Looking at the weekly chart, something I don’t do much because I never liked holding UGAZ for very long at one time, UNG is at a solid lows. The problem wit this UNG trade, I’ve not traded much around my core position. Mainly because I had planned on holding UNG through a larger swing up and trading UGAZ more short term. Since I’m not buying UGAZ, I may need to layer out of UNG a little one the bounces, even if it doesn’t pay as well as I was expecting. Caution is still the focus here no matter what I do. Oil continues to fall and that is not helpful presently, but will help out in the long run. When Oil prices fall, oil production will taper off some, allowing associated gas production to decline as well. That’s more a part of this strategy than I was hoping for.

$1.72 for NGJ20 is not significant to me. Today’s fall is are larger move for one day, that’s what makes this tempting. I’m going to stay cautious here and wait one more day to add to UNG. Markets are falling, it is hard to gauge whether fear of a pandemic is worsening or not. I’m sure for many, it changes hourly. My paranoid self tells me I better wait. There is too much risk of more panic in everything right now to be taking a chance here. I should have more time tomorrow to focus on everything. For now I’ll be waiting. I think I repeated that a couple times now. waiting waiting waiting waiting waiting.. There…. Good Luck

Oldinvestor

Sorry for taking forever to post today. I certainly cannot become a regular practice.

Oh, and take a look at ZM (Zoom Video Conferencing). That seems to be a good choice right now. People can’t fly to meet with each other, so they should be video doing a lot more video conferencing.

Morning Update Feb 26, 2020

I’m am short on time, gotta load a new program into some equipment and test while they run product, barf. I’m always torn on doing that. It’s exciting and fast, but stressful.

I’m also torn on Natgas. I stay long, thinking about adding to my position again. fundamentals are holding steady. The coronavirus is waning in the news each few days until something new pops up. Yesterday it was the CDC stating that it’s coming. Well no shit it’s coming. Even with these little surprises in the media, everything is really progressing as usual.

NG1 on 1 hr chart at Tradingview.com

The chart looks to have held and is turning. We know NG is full of surprises. I am still going to just hold what I have in UNG. I can be happy with a gain on 50% of my holding in UNG.

They are calling my name. Gotta go. I’ll hold this 50% of funds in UNG for a while if the market turns around. And if it doesn’t, I will not be out any extra. If the coronavirus is going to cause major damage, it will take a while to show up (the damaging effects that is). Good Luck

Oldinvestor

extra note: I may try a short VIX trade soon with say 5% of my funds, but I’m being patient for that trade. In this account, the trade will be made by buying SVXY.

Morning Update Feb 25, 2020

Boy… That looks tempting

VXJ20-VXK20 YoY comparison to past 10 years at Spreadcharts.com

I think I’ll buy a little SVXY, and short a little less TVIX to compare the two. I plan to wait to short VX spreads. I’m still nervous about coronavirus COVID-19. Here is an article that puts it more in perspective for me;

“The new coronavirus has killed nearly 3 times as many people in 8 weeks as SARS did in 8 months. Here’s how the 2 outbreaks compare.”

Also, I’m reading that South Korea is not restricting residents from venturing out. I think they see that they can’t stop COVID-19 from spreading. I know if the spread makes it to where I live, I will venture out as little as possible.

Ok, on with Natgas. Not much as changed in the last few days. LNG is still being exported at a consistent rate at or above average. Total supply/demand is holding steady. I was under the impression that storage would not catch up to the 5 year average. Right now, it appears I was reading the numbers wrong last week or so? There is a slight chance storage could meet the 5 year average by the end of the withdrawal period. I can actually see where NG might trade in a range for a short time, as long as LNG does not crash the party.

I’m going to leave it at that, I’m late on the post and must get to work. I’ll keep holding UNG with 50% of my funds. Good Luck

Oldinvestor

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

Oldinvestor

Morning Update Feb 20, 2020

Well the power just went out for the entire plant….

Weather changes have been less volatile lately; also there is a good chance the forecasted cold spell will come to be this time. For the most part, this cold is already priced in. There really isn’t much more to say about it. Cold will help, but production has got to continue to decline and LNG has got to hang in there.

Monthly NG demand by Power burn at RonHenergy.com

I think my favorite Demand factor has been power burn, not because I’m an electrical guy. Power burn has provided consistent growth to NG demand every year far longer than LNG, and can be pretty well relied on. I always thought SWN or CHK should start a power plant in central Arkansas when the Fayetteville shale was booming. Now that gas is cheap and they can’t sell it, they could just supply it to their own power plants. Seems easy to me.

Speaking of power, it will most likely be restored soon, and I will busy as all hell. I’m going continue to hold my 75% of funds in UNG to reduced to 50% at $15.71. If prices turn back and fall from here, I’ll wait to add to my position. Probably closer to $14. Good luck today, EIA at 10:30 eastern time. HFI expected draw of 160.

Oldinvestor