Energy Trader

Bullish Option Ideas in Energy and Financials

$8 mcf gas? If you really believe that why buy a nat gas trust, when any number of gas E&P's are much more levered to nat gas?

UNG Gets Creative, Secures $500M Natural Gas Swap

Does anyone know who is actually buying this? Why would anyone want exposure to natural gas at a 14.4% premium?

Not All Commodity ETFs Are Created Equal

While oil and nat gas have an energy equivalent rating of 1:6 the ratio comparison does not make since. Chiefly b/c they are not perfect substitutes. This comparison is like comparing gold to diamonds. Someone who wants gold will not readily trade it for some comparable equivalent of diamonds. Ask any woman. In the same way someone who owns a car will not trade nat gas for oil to fuel the transportation needs. Oil is used for transportation and nat gas is used for electricity generation, for the most part.

The Fall in Natural Gas Is Over

Alaskan nat gas should not be considered in any supply, demand, import or export when talking about the US nat gas industry. Until there is a pipeline that can bring it to market it is just the same as Qatar, Yemen, or Australia's nat gas, a world away.
So when


On Jul 01 06:58 AM H. T. Love wrote:

> Proof read first dummy!
>
> On Jul 01 06:56 AM H. T. Love wrote:
> <snip>

The Fall in Natural Gas Is Over

The LNG that is exported from the US is either 1) imported from a foreign country where it was liquified and shipped to the US to be stored and can be sold to the US market or exported and resold in some other country where the nat gas price is higher but in no way was produced in the US and was only ever shipped to the US as nat gas prices are higher or there is LNG storage capacity (this is currently not happening but there are companies with facalitites capable of doing this), or 2) the LNG is from the nat gas fields in Alaksa where they do have the ability to liquify and is exported usually to Asia (currently it is all going to Japan). Alaskan nat gas does not factor into the US nat gas pricing equation as it is stranded and there is no way for it to come to the lower 48 states w/o first being liquified, once it is liquified the nat gas goes to the most desireable markets, which is not the US. The LNG exports do not drive the nat gas higher since the prolific fields in the lower 48 have no ability to liquifiy their product and sell to other markets.

If you bothered to look at the same graphs for production you would see in April only 2 BCFs were exported, for the whole month! Not very material considering storage builds were 94 bcfs last week

My point about it being illegal is still correct as there are no pipes taking nat gas to mexico b/c it is illegal. To further explain why nat gas prices are not going up due to exporting of the gas, can you imagine a scenario of CHK or BP exporting nat gas? If they tried to export the nat gas from the Barnett or Haynesville or anywhere they would find Congress calling a hearing about exporting our natural resources. In short it would be political suicide for these companies along with the fact it is illegal.

On Jun 30 01:34 PM Mark Anthony wrote:

> I showed you the EIA price chart, it shows an LNG export price:<br/>
>
> tonto.eia.doe.gov/dnav...
>
> If there were no LNG export how could there be a market price for
> LNG export? Of course there were LNG export. And where does it say
> it is illegal to export LNG?

The Fall in Natural Gas Is Over

The LNG that is exported from the US is either 1) imported from a foreign country where it was liquified and shipped to the US to be stored and can be sold to the US market or exported and resold in some other country where the nat gas price is higher but in no way was produced in the US and was only ever shipped to the US as nat gas prices are higher or there is LNG storage capacity (this is currently not happening but there are companies with facalitites capable of doing this), or 2) the LNG is from the nat gas fields in Alaksa where they do have the ability to liquify and is exported usually to Asia (currently it is all going to Japan). Alaskan nat gas does not factor into the US nat gas pricing equation as it is stranded and there is no way for it to come to the lower 48 states w/o first being liquified, once it is liquified the nat gas goes to the most desireable markets, which is not the US. The LNG exports do not drive the nat gas higher since the prolific fields in the lower 48 have no ability to liquifiy their product and sell to other markets.

If you bothered to look at the same graphs for production you would see in April only 2 BCFs were exported, for the whole month! Not very material considering storage builds were 94 bcfs last week

My point about it being illegal is still correct as there are no pipes taking nat gas to mexico b/c it is illegal. To further explain why nat gas prices are not going up due to exporting of the gas, can you imagine a scenario of CHK or BP exporting nat gas? If they tried to export the nat gas from the Barnett or Haynesville or anywhere they would find Congress calling a hearing about exporting our natural resources. In short it would be political suicide for these companies along with the fact it is illegal.

On Jun 30 01:34 PM Mark Anthony wrote:

> I showed you the EIA price chart, it shows an LNG export price:<br/>
>
> tonto.eia.doe.gov/dnav...
>
> If there were no LNG export how could there be a market price for
> LNG export? Of course there were LNG export. And where does it say
> it is illegal to export LNG?

The Fall in Natural Gas Is Over

That is impossible, there is no way to liquify US nat gas (any LNG leaving the US was liquified oversees and brought here to be stored). On top of the fact that it is illegal.


On Jun 29 06:13 PM Mark Anthony wrote:

> I believe LNG import/export will be one factor among many to drive
> natural gas in the US market much higher, in short term. Check out
> the pricing:
>
> tonto.eia.doe.gov/dnav...
>
> Do you notice that US LNG import price in April was $4.20, much lower
> than the norm of LNG import price but still much higher than domestic
> natural gas price. Mean while the US LNG export price was $7.33,
> much higher than import price and much higher than domestic natural
> gas price.
>
> There is now a huge incentive to STOP all US LNG importation, purchase
> natural gas from domestic market, liquify the gas and EXPORT the
> LNG to other countries. This will drive up the price.

Is UNG Propping Up Natural Gas Prices?

YES, UNG is propping up the front of the nat gas market. There is no question about it.

I agree with ETF Grind, I don't think institutional traders and the like are buying into this, rather it is more likely to be the unsophisticated investor without other options to bet on nat gas prices.

My Current Natural Gas Trade

Daxtatter,
I'm not sure you understand the significance of shale plays. Companies will keep some of their rigs drilling because of existing rig contracts or to prevent leases on held acreage from expiring. The drilling in shale has very high production at the beginning, which allows cash strapped companies to continue funding operation. Hence, many will not stop drilling their leases b/c they have to pay the bills. As a result of the reduction in drilling, there will be continued downward pressure on service and drilling costs. I'm very skeptical of your $4 cost. A portion of the costs are already spent, so if spending $1 more allows you to sell $4 nat gas and your company is strapped for cash you drill. Also, many of the quality operators F&D costs are closer to $2, the $6-8 range commonly thrown out is for the smaller/newer nat gas companies going bust. Also, these lower costs mean the ability to achieve same rates of return at a lower gas price for the nat gas companies.

If your thesis is that when the economy recovers nat gas price will recover, I agree with that with some caveats. The only thing is UNG is not a good investment tool to bet on that happening. This is due to the current contango, as the fund rolls into the new front month you will continue to lose 4-5% each month (even if/while nat gas prices increase).

Land Driller Sector Outlook: It's All About the Natural Gas

What would also be informational is to show production on the same graph with the rig count.

Basehitz made me wonder is it the WS people that are in the UNG or is the individual? I have been of the opinion that WS has better options than the UNG, like directly buying the forwards, and that the investors are the individual traders. What do others think?

Also, the WS reports/commments I see are bashing UNG while cites like this are talking up UNG

Should Mexico Stop Exporting Oil?

Cold Fusion? Really. Is there anyway to block comments from Mark Anthony so we don't have to see them? I'm sure others have to be asking the same question.

Or Mexico could follow Brazil where they had a national oil company in Petrobras performing just as poorly as Pemex is currently, privatize the oil company and open it upto the public. Once that happens I would imagine numerous 100 MM bbl fields being discovered. The more we look for oil the more we find. It happened in Brazil, it can happen in Mexico.

My guess as to what will happen: As usual with any government tough decisions will not be made until they absolutely have to. At that point the people of Mexico will come together and find away to get the oil out of the ground in an effecient manner.

Deal Conditions Ripe for Energy Producers

What does the author mean by 'to acquire cash flow that would better support its high debt and spread its high cost of talent over a bigger base'?

HGT's dividend is less than 3 cents a month and SJT's is under a cent.

IMO - San Juan's dividend will continue to be under a cent for 4-6 months due to: 1)their properties are receiving very low gas prices $2.64/mmcf according to their last NR due to how far they are from market and 2) the dividend is based on April production.

So, it should be at least under a cent for 2 months as we May and June nat gas prices reflected in the dividednd. Since, I am very bearish on nat gas, I see a high possibility of storage filling up at the end of the summer, which would lead to continual lower prices for 2 months and then maybe 2 more months of increases to get back to where we are now. I believe in the long-term story of nat gas and that the time to buy will be in approximately 3-4 months. It may be even longer for SJT as they may indefinitely cut their dividend, I just do not see how they can support it.

Follow the Piling into Natural Gas

I just noticed today that Jan - May average price for oil was $47.79, nat gas was $4.18. The fact that oil is currently trading nearly 50% greater than the this year's average price should make us think: 1) is oil going to continue going up (I mean really how high and how fast do you expect something to go up when it is not based on fundamentals) or 2) is it more likely oil is due to come down some.

Traders and Investors Pile into Natural Gas ETF

Mark,
Nice comment, it is true just irrelevant. Shale plays and LNG are a game changer. If you haven't heard their are several BCF's per day in the Barnett and Fayteveille shales that have not been completed and tied into existing pipelines. It will cost almost nothing (compared to the return even at say $2-$3 nat gas) to the producer to add that supply to the market (true the well maybe a net loss but the producer still needs the cashflow). Add LNG being dumped here in the US and we are easily looking at a very high possibility of full inventory by the end of summer.

I completely agree that long-term nat gas is going up, if that is your thesis UNG is not for you. As dcb said the roll wil kill you your investment.

Also, what do you think the cost of LNG per MCF is? It is approximaely $2. The LNG owners have already sunk most of their costs into the trains, there is no way they are going to stop production while they still have positive cashflow, they have lots of debt among other things to payoff.

Traders and Investors Pile into Natural Gas ETF

Mark,
What supply/demand fundamentals do you refer to. 1) Rig count is going down yet supply is increasing. 2) Demand is dropping (not sure if you heard but GM and most industrials, which are big users of nat gas, are slowing production over the summer). 3) Storage is about to fill up. 4) We are well ahead of the 5 year average for nat gas inventory. 5) LNG, it is highly likely we will see it dumped here in the US. 6) Well head prices in the West are in the $2-3 range and often below, that is a sign of little demand. 7) Watch this weeks build in inventory it is very possible it will be twice last years build for this week.

Also, if you pay attention to who likes this etf it is two kinds of people 1) those who think a 18:1 oil to gas ratio means something, which it does not and 2) momentum guys.

The etf has what could be considered 78% of open interest on the futures market, that is the only thing supporting nat gas.