Waiting for UNG's New Issuance to Prove Itself

Per a UNG SEC Filing of September 11, 2009, UNG will begin issuing new units on September 28, 2009. The issuances will be limited and subject to terms and conditions laid out in the prospectus referenced by the above link to the SEC filing. The authorized quantity is 1,079,800,000 units.

NB: In the past I had been under the impression that redeemed baskets could be re-issued. I have since discovered this is not correct. When baskets are redeemed, they effectively "vaporize". I can not recall if I ever stated they could be re-issued, but I'm pretty sure I must have said that somewhere because I tend to operate in "brain dump" mode. Anyway, I was wrong.

Now back to our regularly scheduled program.

UNG believes that it can now issue new creation baskets, under limited circumstances, and meet its investment objectives. If circumstances change prior to the new issuance date (again, 9/28) such that UNG believes it can not issue new creation baskets, it will announce such changed circumstances through an 8-K filing as soon as practicable.

The terms and conditions for new issuance of creation baskets include:

• authorized purchasers must agree to sell specified investments to UNG, that are accepted at the sole discretion of UNG, that meet UNG's investment objectives, including fully collateralized OTC swap arrangements, of certain size and duration, whose counter-party meets UNG's creditworthiness and diversification standards and any other other terms UNG determines to be appropriate, at the sole discretion of UNG;

• UNG may limit sale of creation baskets to various minimums or maximums for any authorized purchaser;

• UNG may vary the terms and conditions of the investments to be delivered or arranged by an authorized purchaser;

• UNG may decide to offer creation baskets only on particular days; whether or not an offering will be made; what will be the terms and conditions for that day; those terms and conditions will be announced each day no later than start of trading in UNG on the NYSE ARCA.

As the caveat to the investor, the prospectus states that the effect on premium over NAV is not predicted and that additional losses may occur if an investor bought or buys at a premium and then sells when the premium is lower.
UNG also warns that the new issuance process may involve fees in excess of what was incurred in the previous process of rolling futures contracts, increasing the expenses and tracking error. However, in the prospectus, UNG does not offer any speculation or expectation of what these fees may be or to what degree they may increase.
WEAK ANALYSIS: What does this mean to those holding UNG or thinking of entering UNG?

• Premium of 0% is increasingly likely now, especially after September 28. At end of 9/11, premium was 16.12%.

• The conditions UNG is imposing on authorized purchasers seems a strong attempt to control and minimize counter-party risk, which was not needed in the previous futures contracts scenario. How effective this really is depends on the quality of execution by UNG - credit history checks, review of long-term history of the counter-party, current financial status, risk assessment, etc. Your faith in the ability of UNG to properly carry out these risk assessments and ameliorate such risks should be a part of your investment decision-making process.

• The flexibility to issue creation baskets on an "as desired" basis seems intended to allow UNG to ensure it can comply with any CFTC limits that may be imposed while protecting against "breach of contract" issues with the authorized purchasers if UNG bumps up against any CFTC-imposed limits.

• All the above seems to reduce risk of nasty government-imposed surprises causing the investor losses over-and-above those that might be suffered in a "normal" environment (is there any such thing in this "Brave New World"?).

• I believe the previously published expense ratios are no longer reliable figures - future expenses will likely be higher. This has implications for long-term holders of UNG units.

• Since OTC swaps are replacing futures contracts, I had hoped to see if a "roll" was still to be used and how and when. None of these were addressed in the new document.

RECOMMENDATIONS: In the past, I've stated my opinion that UNG is not an investment vehicle, but a trading vehicle. I believe it is more so now because the expense ratio is unknown, the expense, timing and effect on NAV seems unpredictable with the currently available information, and the effect of the uncertain frequency and (in)consistency of new issuance on premium to NAV and market price seems unpredictable for now.

Combined with considerations I've stated in past articles, and comments I've posted in articles by others, I suggest the following.

• If you are investing long-term, do not enter at this time. Wait for a while, see how things behave and review one or more subsequent 8-K reports to determine if the vehicle is suitable for your purposes. Do keep in mind that in a couple months (that's optimistic - I believe it will take until the first quarter of next year at least) the contango may be substantially reduced or we may even see backwardation. If you want to get into UNG be prepared to enter as this situation approaches as roll will then gain "contracts" rather than losing them.

• In any case, be sure and use covered calls and/or puts (I prefer calls to rake in options premiums rather than paying out cash for protection) to help reduce effective cost, collect premiums or provide downside protection.

• Keep in mind that prices seem to get the lowest during the roll periods 60% or more of the time. Plan your moves around these points, keeping in mind options expiration dates so you are aware of possible short-covering and so you can roll your options (short calls), if you use them, and/or lock in gains. Actually, I would not "roll" if I believed there would be appreciable price rises after the roll period. I would close the short option(s) at what I think the low is and later enter a new covered call position when I think the price is up near a near-term high. Of course this only works if you have confidence that you are familiar enough to spot the trends and "time" your actions.

• If your options positions are long puts, you want to buy at what you believe is a high price for the underlying UNG units and sell the options when the underlying UNG units are at a low price to take profits. Of course you can also hold and then exercise them if you feel it is your preferred option.

• Remember that time-decay is your friend if you are short calls (e.g. covered calls) and is your enemy if you are long puts. It's best to use an option calculator, such as provided freely at the Options Industry Council web site, to plan your entry and exit points. If your trading platform provides one, as mine does, that should suffice.

• Professionals normally suggest that us little guys do not attempt this. I will not dispute experienced folks. However, I do freely ignore them all the time.

CAVEAT: with so little knowledge about what exactly the OTC swaps do, I can only assume that UNG is structuring these positions to closely emulate the effects obtained in the past, via futures contracts. This is an assumption by me and may be incorrect and the observed effects may vary significantly from those observed in the past.

If you are an experienced trader, it would be presumptuous for me to make any recommendations since it is likely you are more experienced than I. So I will not suggest any more than I have in past articles and comments.

Disclosures: long UNG, covered calls, long puts and some synthetic shorts.

Comments

[august:]

Thanks for the article. I have a newbie question. If UNG attempts to track NG prices, and the futures are in Contango, does that mean traders expect NG prices to be higher in the future months? If NG prices are higher in the future will UNG prices be higher too?

Sep 14 07:54 AM

[basehitz:]

HTL, thanks for the update. I had hoped UNG would be an investment (rather than a trade) given it is locally available and relieves somewhat our dependence on energy imports. Unfortunately, we haven't taken full advantage of the abundant supply. And UNG has other variables that have nothing to do with fundamentals. It remains on my screen, but only as a trade for now.

Sep 14 08:16 AM

[tuj:]

"I have a newbie question. If UNG attempts to track NG prices, and the futures are in Contango, does that mean traders expect NG prices to be higher in the future months?"

The steep contango in the front months is historically very odd, while the flatter contango in the back-half is more reflecting what you say. Contago must reflect the "cost-of-carry", so a normal market can generally have a mild contago. Go to investopedia and read about contango and backwardation; contango alone does not mean things are bullish.

Sep 14 08:31 AM

[Ed L:]

This is an example of the complexity and uncertainty that surrounds an investor in UNG. When you get into the depths of UNG it begins to look like one of those derivatives that some genius created but nobody fully understands or considered the unintended consequences. Now selling at a 16% premium that could fall to zero with the issuance of new units?? This is a time bomb and I hope mine gets called away from me at option expiration.

Sep 14 08:53 AM

[Mad Hedge F...:]

cbn Since I have had such a hot hand in natural gas (see my call to sell at $4.30 in June by clicking here ), many have asked me to comment on yesterday’s surprise announcement that the ETF, UNG, finally got permission to issue new shares. The easy answer here is that UNG will crater. There is no reason for the fund to trade at a premium, whatsoever, which at one point traded as high as 20%, an overvaluation you normally only see in closed end funds at bear market bottoms. These ETF’s are simply pass through vehicles which make it easier for investors to own NG in stock form when they are legally unable, or too lazy to open a futures trading account. They should never trade more than 1% out of line with the underlying to account for the admin and execution costs of running such an instrument. The people who made the killing here were the handful of hedge funds that were able to borrow UNG shares, sell them short, and go long the futures, locking in a guaranteed 20% spread. They will cash in their profit next week. Something similar is still going on where smart industry players have locked up salt caverns to store gas, buy it cheaply on the spot market, and sell it forward. This is possible because yesterday you could buy October at $3.25/MCF and sell it for April delivery at $5.32, giving you an annualized return of 127%. Leverage that, and you are talking about some serious money. If you were wondering where the money was coming from to buy those G5’s, this is it. The fundamentals for the industry are still terrible, and there is a risk that the market could completely grind to a halt when the country runs out of storage, so the volatility will remain huge. This week’s explosive 44% move from $2.40 to $3.44 was nothing more than pure short covering. I expect a quick double in NG once the storage issue is resolved, and the cheapest, cleanest, and most liquid way to participate is through the futures. If you need help in how to

Sep 14 09:54 AM

[receipt:]

HZBBF is the symbol for Horizons BetaPro NYMEX Natural Gas Bull ETF is a Toronto, Canada based institution which seeks two times (200%) the daily performance of the New York Mercantile Exchange natural gas futures contract for the next delivery month. It's a very effective way to play your disposition to go long natural gas in a time period where the economic imperatives to substitute natural gas for oil in many applications is becoming increasingly impossible to deny, despite conversion costs.

Sep 14 12:29 PM

[KonKreteishard:]

Interesting technicals on UNG, looks like a bottom setting up. I have to laugh at Dion the dud and Cramer the clown. The NAV appears to be coming up to the price with premium. Those two guys belong in a clown factory, LOLOLOL

Sep 14 02:59 PM

[BullnBear:]

I caught a representative of the US commodity funds on CNBC back on the 2nd of September and he didn’t sound real happy with the direction of this or any other major commodity ETF fund due to the regulation that’s being discussed.

I honestly don’t understand what is going on with this ETF and that is my main internal guide at this point.

I’m more comfortable taking a run at natgas via the drillers or futures.

Sep 15 12:57 AM

[H. T. Love:]

Tuj gave the best advice. But to add a little more,

On Sep 14 07:54 AM august wrote:

> Thanks for the article. I have a newbie question.

Well, if you've looked at my profile, you know that I only have a noobie answer 'cause "now I are one" too! :-))

> If UNG attempts
> to track NG prices, and the futures are in Contango, does that mean
> traders expect NG prices to be higher in the future months?

Yes. But it really means that the expected prices are *more* than enough to offset the cost of storage and related fees and provide a profit higher than selling right now, which would have, essentially, little or no storage fees.

> If NG
> prices are higher in the future will UNG prices be higher too?

Not necessarily.

The effect of contango means that when UNG rolls from the front month to the next month contract, it will own fewer contracts. E.g. if I own 100 contracts currently worth $10 and I need to roll forward to the next contracts currently worth $11, when the roll process is done, I'll only own 90.9 (theoretically) contracts. There are also fees associated with the process, let's say $10. So I'll own 90 contracts worth $11 each = $990. So just by rolling, I've lost $10 (1%). Do this enough times and you end up with nada.

On top of that, when the contango does not improve, the new contracts we own tend to lose value with time (time decay). So next rollover period, it may be even a bigger hit it the succeeding contract doesn't deteriorate in price by the same percentage as the near-month. And just like options, futures contracts nearer to expiration suffer a higher rate of time decay than do contracts further away from expiration, all else being equal.

So, the only way you can profit on a derivative with these sorts of characteristics is to have the underlying (in this case natural gas) price rise enough to offset the near-month time decay and the next month contract *not* rise as fast.

This generally only happens when there is more demand for *immediate* delivery (so to speak), usually because of an (expected) shortage or an external event causes a big surge in demand *now*, and demand further out does spike the same way, maybe because folks think there'll be more available at a lower price later on.

This makes it more profitable for companies to sell in the spot market right now rather than promising delivery on a futures contract (remember, there are costs associated for storing the gas until delivery time). A side effect of this means usually people start lining up other near-term deliveries using near-term futures contracts. So their prices tend to also go up, but generally not as quickly as the nearer-term prices because the real demand is for, essentially, right now.

That means it becomes less profitable to incur long-term storage costs and sell at a high price than to sell in the near-term at a high price, but with lower costs incurred. So further out contracts tend to be cheaper than nearer-term contracts. We then have "backwardation".

If current price plus storage and processing costs for further-out delivery = that contract price, you don't *really* have a contango or backwardation.

Anyway, what happens when we roll during backwardation? Using that same 100 shares, let's assume the next-month contract is now worth only $9. Take away the $10 fee (actually may be a tad more or less to to fees being based on quantities I guess) and we have

(1000 - 10) / 9 = 110.

So we've gained contracts instead of losing them. And if we're in "backwardation", the underlying price is likely rising too. If it rises faster than the time-decay removes value from the contract - ignoring what's happening to the next month - we make out like bandits!

That's why in my comments and articles I encourage folks to enter UNG only as a trade for now, if they must get in. You can really only profit from intra-contract price movements by nimbly buying and selling *unless* ...

- you can predict the direction of price movements
- you can predict timing of price moves reasonably well
- you use options over UNG to help offset the losses racking up while contango exists

And the only reason to do that is if you're long-term bullish on NG and want to hang on to UNG until the bullish scenario develops and backwardation occurs (or at least contango drops off substantially).

The effect of contango means that when UNG rolls from the front month to the next month contract, it will own fewer contracts. E.g. if I own 100 contracts currently worth $10 and I need to roll forward to the next contracts currently worth $11, when the roll process is done, I'll only own 90.9 (theoretically) contracts. There are also fees associated with the process, let's say $10. So I'll own 90 contracts worth $11 each = $990. So just by rolling, I've lost $10 (1%). Do this enough times and you end up with nada.

On top of that, when the contango does not improve, the new contracts we own tend to lose value with time (time decay). So next rollover period, it may be even a bigger hit it the succeeding contract doesn't deteriorate in price by the same percentage. And just like options, futures contracts nearer to expiration suffer a higher rate of time decay than do contracts further away from expiration.

So, the only way you can profit on a derivative with these sorts of characteristics is to have the underlying (in this case natural gas) price rise enough to offset the near-month time decay and the next month contract *not* rise as fast.

This generally open happens when there is substantial demand for *immediate* delivery (so to speak), usually because of an (expected) shortage or an external event causes a big surge in demand.

This makes it more profitable for companies to sell in the spot market right now rather than promising delivery on a futures contract (remember, there are costs associated for storing the gas until delivery time). A side effect of this means usually people start lining up other near-term deliveries using near-term futures contracts. So their prices tend to also go up.

That means it becomes less profitable to incur long-term storage costs and sell at a high price that to sell in the near-term at a high price, but with lower costs incurred. So further out contracts tend to be cheaper that nearer-term contracts. We then have "backwardation".

What happens when we roll? Using that same 100 shares, let's assume the next-month contract is now worth only $9. Take away the $10 fee (actually may be a tad more or less to to fees being based on quantities I guess) and we have

(1000 - 10) / 9 = 110.

So we;ve gained contracts instead of losing them. And if we're in "backwardation", the underlying price is likely rising too. If it rises faster than the time-decay removes value from the contract, we make out like bandits!

That's why in my comments and articles I encourage folks to enter UNG only as a trade for now, if they must get in. You can really only profit from intra-contract price movements by nimbly buying and selling *unless* ...

- you can predict the direction of price movements
- you can predict timing of price moves reasonably well
- you use options over UNG to help offset the losses racking up while contango exists.

And the only reason to do that is if you're long-term bullish on NG and want to hang on to UNG until the bullish scenario develops and backwardation occurs (or at least contango drops off substantially).

Others suggest buying contracts directly, but I've never done that, so I'll keep mum. You can also play by owning companies related producing, storing and transporting NG.

You can also play it by playing companies whose input costs are substantially affected by NG price. Those companies may surprise to the upside this coming quarter reporting period and for several quarters beyond.

In all my recent posts and comments, I say UNG is not an investment vehicle right now and I also say not to trade with it right now. *If* you are willing to really work at staying on top of it and have a well-laid plan that accounts for all this and other things about which I'm still ignorant you might be able to profit.

HardToLove.

Sep 15 01:41 AM

[H. T. Love:]

On Sep 14 08:53 AM Ed L wrote:

><snip>
> This is a time bomb and I hope mine gets called away
> from me at option expiration.

If that leaves you in an "acceptable" position, that's good. If not, sell some more calls. But, I don't believe waiting for expiration is how you want to *plan* it unless you know the calls will be well in-the-money.

Generally there's a price drop during the roll period (9/14-9/17). Happens to end as this months options expire, so you have a choice. Anyway, you may want to buy back (close) your options if the price is low (locking in profits) and later sell covered calls again *if* you believe there might be another price bump soon. Then you can pull another set of premiums, rinse, repeat.

This is only worthwhile, in my view, if you think it is worth trying to stay in UNG until things improve. That's a difficult call to make, I think.

Another way is to buy puts. Do it when the price of UNG is what you think is near it's high and you believe the price will drop later. Then you can sell the puts later a profit or exercise the puts. Just remember that time-decay works against you, so you probably want to plan on exercising them.

HardtoLove

Sep 15 01:55 AM

[H. T. Love:]

Your strategy is good. If you want to know more, I've posted a couple articles that give a little overview (click on my avatar and it'll take you to SA blogsite for me) and there's lots of comments and articles on SA about this stuff. A starting point might be to use the serach bar and hunt for UNG or natural gas, ...

HardToLove


On Sep 15 12:57 AM BullnBear wrote:

> I caught a representative of the US commodity funds on CNBC back
> on the 2nd of September and he didn’t sound real happy with the direction
> of this or any other major commodity ETF fund due to the regulation
> that’s being discussed.
>
> I honestly don’t understand what is going on with this ETF and that
> is my main internal guide at this point.
>
> I’m more comfortable taking a run at natgas via the drillers or futures.

Sep 15 01:59 AM

[H. T. Love:]

I said "and demand further out does spike the same way"
and mean to say "and demand further out does *not* spike the same way"

Sorry,
HTL


On Sep 15 01:41 AM H. T. Love wrote:

><snip>

Sep 15 02:04 AM

[Aricool:]

Hi, how liquid is HZBBF? The bid/ask blocks always seem to be pretty small. It does not exactly track its TSX counterpart but pretty close. I'm nervous about it trading on the pink sheets. That is also pretty costly with some brokers (e.g., Schwab)


On Sep 14 12:29 PM receipt wrote:

> HZBBF is the symbol for Horizons BetaPro NYMEX Natural Gas Bull ETF
> is a Toronto, Canada based institution which seeks two times (200%)
> the daily performance of the New York Mercantile Exchange natural
> gas futures contract for the next delivery month. It's a very effective
> way to play your disposition to go long natural gas in a time period
> where the economic imperatives to substitute natural gas for oil
> in many applications is becoming increasingly impossible to deny,
> despite conversion costs.

Sep 15 05:12 AM

[Aricool:]

HT, helpful update. Thanks.

Can you comment on the effect on Nat Gas price if UNG does roll using futures as before. I've read that UNG can account for 30% of the contract volumes during the roll. It would seem to me that as the sell the front month and buy the next month that the front price should drop and the next mo rise. Which has been the pattern observed for just about every roll this year.

I don't know enough to say about the swaps, but if swaps avoid the roll issue then it would seem to me that they cannot effect the NG price so UNG cannot be used by big speculators to move the NG, which would be nice to reduce in this crazy volitile NG action.

thanks,
Ari

Sep 15 05:19 AM

[Aricool:]

HT,

Are you thinking about shorting NG at current prices on a trading basis? CNBC and Bloomberg talking heads are talking bull talk just based on hand waving and "too low" talked. Bulls are pumped on GS coocoo call too. Do you have the nerve to bet that the low injection # was not b/c of increased industrial activity (e.g., maybe as indicated by the good PMI, cash for clunkers replenishment, etc.)? The bulls are try to take control, but can the manipulate the NG price like they do oil?

I suspect some big hedge funds used the weak bull news (cited above) to dump a little money into the NG market and watch bear stops trip like dominoes further attracting bull momentum investors. Then they'll dump it after a certain price reached. I feel like this has been the pattern since June.

cheers,
Ari

Sep 15 05:27 AM

[pockyclips ...:]

H.T.:

Have you heard anything about UNG buying longer term contracts?

Sep 15 08:26 AM

[H. T. Love:]

When I checked the SEC filings, no mention. I was hoping we might see something. But since they won't start issuing until 9/28, maybe they've got something in the works.

I'll be checking because I feel this would be a good opportunity to do something along those lines.

But w have to keep in mind that although it might benefit some of the issues, it may bring others i we don't know about. I'm thinking higher cost could be one. But - I think it was you thought a 3 month window would help?

Maybe John Hyland reads SA? ;-))

HardToLove


On Sep 15 08:26 AM pockyclips 2020 wrote:

> H.T.:
>
> Have you heard anything about UNG buying longer term contracts?

Sep 15 02:23 PM

[H. T. Love:]

On Sep 15 05:27 AM Aricool wrote:

> HT,
>
> Are you thinking about shorting NG at current prices on a trading
> basis?

Not a real short - I don't like doing that since I'm new. I do have some October puts, synthetic shorts and covered calls, so I'm short that way - low risk.

The calls will be rolled, closed or executed either this month or next, depending, and the puts will be either sold or exercised, again depending. The synthetic short is the riskiest one - I could lose all my premium if things don't go well and I take my eyes off things. But it's a small position - 10 contracts total.

The others get me a profit one way or the other - either now or later as I roll, close or execute. My puts were paid for by the premium from the calls, so I'm good.

> They'll do all I want I think
CNBC and Bloomberg talking heads are talking bull talk just
> based on hand waving and "too low" talked. Bulls are pumped on
> GS coocoo call too. Do you have the nerve to bet that the low injection
> # was not b/c of increased industrial activity (e.g., maybe as indicated
> by the good PMI, cash for clunkers replenishment, etc.)?

First, I don't trade on "nerve". Not my thing.

The recent injection was slightly above the 5 year average and 29%(?) lower than last year. But last year, we hadn't had the "crash" yet and things were still going gang-busters. So I'm not surprised that they all thought "less than expected". I think they just remember the recent history. With storage still up 17% any "lower than expected" should take a while to have much affect anyway.

But it was in-line with what I expected based on averages, rig counts like 2003. The Sept 2003 marketed production was appx. 1.66 Tcf and consumption (excluding lse/plt, pipeline, etc) was appx. 1.36 Tcf = net injection of appx. 300 Bcf. Divide that by 4.5 to get weekly average of appx. 66.7 Bcf (*if* I did this math right and didn't lose/gain any zeros).

If that math is correct, the injection was substantially inline. Combine with 17% overstock ... I'm good with believing the EIA projected average October price of $2.25.

If the recent rig count increases over the last 7 weeks were for development, as opposed to exploration rigs, we could see some substantial increased production showing up. I read a comment somewhere that a 3500 (appx. - I forget the real number) foot horizontal could be drilled in 11 days and and a 4500 (appx. again.) in about 14.

If infrastructure is in place they could pressurize and start feed quickly. This would be coming at a time just before the seasonal increase in demand start up (normally October). Again, I'm feeling good about this.

But there are now some OFOs in place and a couple pipeline co.'s are doing a little mtce. here and there. So there's restrictions on injection, requirements for balancing, pressure variations in the lines, etc. that will affect what the producers can do.

This *may* lead to further low net injections later. That might be the reason for the GS call, combined with the expectations that 3rd/4th qtr economy improves. But hey'll be thwarted in their outlook if those rigs were for development and infrastructure is in place. As soon as the OFOs are lifted and mtce is complete, tsunami of gas time again. So I'm still good for the projections.

I think a lot depends on how severe/long the restrictions last and how accurate the economy expectations are. And, of course, winter weather.

With storage still 17% above average, even if no deliveries are made for a few weeks, it should take some weeks for anything to get too drastic.

So I'm thinking we're heading the way EIA said - October prices average $2.25.

Last factor: how much does our current economic activity parallel 2003? I have no idea.

> The bulls
> are try to take control, but can the manipulate the NG price like
> they do oil?

I guess if they have enough money. UNG was considered to be *possibly* affecting prices with $3.45B capitalization.

>
> I suspect some big hedge funds used the weak bull news (cited above)
> to dump a little money into the NG market and watch bear stops trip
> like dominoes further attracting bull momentum investors. Then they'll
> dump it after a certain price reached. I feel like this has been
> the pattern since June.

I'm totally ignorant of *how* and who, but I also feel there is a manipulation to set up some folks to be fleeced here.

But, I'm too new to feel certain - hence, my options positions.

well, other things to do.

Thanks for posting. I enjoy the thoughts you present. Keeps me on my toes (and makes me realize how many things I haven't calculated yet)! <*sigh*>

HardToLove
>
> cheers,
> Ari

Sep 15 04:01 PM

[Aricool:]

HT, I'm responding to just the parts of your message quoted below:

"Not a real short - I don't like doing that since I'm new. I do have some October puts, synthetic shorts and covered calls, so I'm short that way - low risk."

Low risk = low reward, so you need lots of volitility.

"So I'm not surprised that they all thought "less than expected". "

if these analysts don't even capture your cited top level factors, what good are they for the bulls to base a rally upon? This reminds me of stock analysts who mostly just want to here the est. EPS, cash flows, and they just slap a cookie cutter multiple based on est. 5 year growth- nothing to do with fundamentals, just history and a few zero-order variables.

"But there are now some OFOs in place and a couple pipeline co.'s are doing a little mtce. here and there. So there's restrictions on injection, requirements for balancing, pressure variations in the lines, etc. that will affect what the producers can do."

I read an SA article says the lower injection couild be due to these isues. It also makes sense to me that various parts of the country will fill their local storage earlier than others so surplus supply would have to be rerouted to more distant storage and maybe if that cannot be done then the producer in the bottle kneck section of the pipeline has to cut back, so less over-supply injections for logistical reasons. I'm sure the EIA knows these details, but the truth sould be known to us in 2-3 weeks!

thanks,
Ari

On Sep 15 04:01 PM H. T. Love wrote:

> On Sep 15 05:27 AM Aricool wrote:

Sep 16 03:59 AM