Time to Bet on Natural Gas ETFs and Stocks [View article]
Your table of price appreciations from lows to highs in Aug-Dec of each year is misleading. A substantial amount of the indicated returns is not achievable owing to the fact that you compare apples to oranges. Each price indicated is the prompt contract price on the given date. But the definition of the prompt contract changes every 30 days. For instance, first line, 1994. Low date is 9/23/94. That price was for the Oct 1994 contract, expiring that very day. So you could not have held this contract to the High date of 10/26/94. The prompt contract on that date was the Dec 1994 contract. The Dec 1994 contract priced at $2.014 on the low date given of 9/23/1994. So, instead of the indicated return of 44%, the actual achievable return was 0.8%.
This is because of contango. The Oct 1994 - Dec 1994 spread on the date of the low was $0.61, virtually all of the return indicated. So, you're not indicating the return for gas investors investing in the prompt contract in the 2nd half of 1994, but actually the carrying costs of gas over the period indicated.
A revised table indicating the true return for any investment in the actual contract that made the high on the date indicated.
1-Prompt Contract @ Given High Date 2-The Price of (1) at Time of Given Low 3-Spread of (1) to Prompt at Given Low in USD 4-True Return 5-Indicated Return
So the actual average return 1994-2007 and 2009 is cut by 5,430 of the 8,835 basis points indicated.
This is important to know: the substantial majority of the indicated 88.4% return is actually the carrying cost of shepherding the prompt contract from the indicated low date to the indicated high date. In 5 of the years, the cost of carry was over 70% of the indicated return, 1994, 2001, 2006, 2007, and 2008.
Demand has not been increasing, in fact we used 1% less gas in 2007 (the last boom year) than we did in 2000. Further, we're used just as much last year as in 1997.
The message in storage is not about static levels but about the change in those levels.
In the US Gas Economy, at all times, Supply - Demand = Storage. Storage is the supply/demand balance. This greatly helps us understand the fundamentals of this market in the presence of debates surrounding supply and demand levels.
Since the start of the "traditional" build season on Apr 1, through the latest data we have at Aug 20, we have built 1,392 Bcf. This, rather Shakespeareanly, matches to the Bcf, the 5-yr average build for the period Apr 1-Aug 20 at 1,392 Bcf. This is why the surplus to the 5-yr average on Apr 1 and Aug 20 are equal at +177 Bcf.
The bearish part is NOT that were at +177 to the 5-yr average, but that we built at the 5-yr average pace during what will certainly become the hottest summer for the US on record.
Given that we know Storage = Supply - Demand, a 5-yr normal build during the hottest summer on record is quite bearish indeed.
You stated: “I have not changed my forecast on storage going to the 5 year average and prices will likely be a lot higher over the next 6 weeks.”
Do you realize what sort of historical outcome this would prove to be? Stocks on Sep 10 equaled 3,267 Bcf. The 5-year average on October 31 is equal to 3,476 Bcf.
For US Storage to equal the 5-year average on October 31, we would have to see injections limited to a total of 209 Bcf for the remaining 7 reports covering the period from Sep 11 to Oct 31.
209 Bcf as in about twice what we saw just in last week’s report alone.
209 Bcf as in an average of 30 Bcf/week.
A look at historical injections for the period Sep 11 – Oct 31, in Bcf:
The 5-year average is a build of 401 Bcf. The record-low injection is 254 Bcf in 2002, the next lowest is 337 Bcf in 2006.
You are asserting that we will take out an already outlying record-low injection pace for the balance of the period through October 31 and one that is literally *half* of the 5-yr average clip.
Are you insane? Does nothing appeal to you with respect to preserving your reputation following this?
I echo and augment Papa’s thoughts: you are an especially dangerous voice in the natural gas market.
Xomba/Keep Appreciate the sentiments/thoughts. I'm actually a bit astounded at Bill's neglect of his own article. Which then leads to my surprise of his keeping of 111 followers.
What's most frustrating about this: there are precious few things in the NG market that are "easy"; one of those rare things is tracking storage against temperature. There are plenty of ways to get tripped up in this market, misunderstanding what *weather-adjusted* storage is communicating should never be one of them. Bill has paid readers here a deep disservice, only accentuated by his pusillanimous silence.
Mister I find general agreement with your sentiments. However, when applying the idiosyncrasies of this situation, they loose purchase. Bill is not being insulted here, Bill is being presented with facts and doing two things with them: 1) ignoring them and 2) selling a product predicated upon intellectually dishonest work.
Bill has been selling (the operative term here) the story that the supply of natural gas is falling for well over a year. His first installment that I know of is from June 2009.
It is this extended period of faulty analysis that renders void any suggestion that Bill Powers could be right at this point.
My language is a touch caustic because the man, *who takes people's money in return for guidance through the natural gas space*, clearly refuses to engage in factual discussion. This pushes him towards, but not into, the definition of fraud. Ergo, I feel my treatment of him has been fair.
Bill Powers is not correct. Should the market tighten tomorrow, Bill Powers will still not be correct.
The S/D compositte for NG will change, I fully agree. I've never stated differently in any of my comments. But this is not the winter where that will happen. The demand comps to last year are just far far too steep - we drew 2.1 Tcf Dec 1 - Feb 28 owing to deep-sigma temperatures in very demand sensitive areas and a 4-sigma snowfall for the Mid Atlantic states. I would put the odds of a 2.1 Tcf draw over the same period this year at around a 0.5 Delta - something akin to alien abduction insurance. And once we're done with the core of winter, we've got the demand comps from June 1 - Sep 30 this year to battle.
I believe in one religion - price. Price will re-balance this market. Hopefully this winter will do it, hopefully we'll get the incredible pain that will be required to consolidate the drilling space and introduce some much needed production discipline. Auxiliary demand will not clear this market over the next 12-24-36 months. Take a look at total annual demand since 1995. Run it against price. Observe the utter lack of elasticities. We need pain to run big and run deep into the producers, kill quite a few of them off, and find the only way to balance this market over the medium term - supply.
Appreciate your kind preface and I will take the beer bet (which is essentially a weather bet) and will be thrilled to face paying you on it, as a $4 trade before Christmas will be a phenomenal gift.
And now we're censoring appropriately critical posts. What a laugh. Identical construct to the playground logic where closing your eyes makes you invisible to others.
Great work at this site, keep publishing inexact analysis of the natural gas markets (not limited to the production of Bill Powers) and silence those with the facts. Smart. If you find the feedback too caustic, toughen up, you stand to actually learn something from it.
The Problems Plaguing Chesapeake Energy [View article]
Great article, the energy-commentary community has largely given AM a pass on his absolutely reckless behavior in retiring CHK's NG production hedges. It was a ridiculously stupid move. The BOD should have his ass on the street.
Natural Gas: Where Bullish Dreams Go to Die? [View article]
Never suggested that NG is used exclusively for heating/cooling. But perhaps you would do well to understand that it is almost exclusively the source of swing demand. Ever taken a look annual demand with monthly granularity? Here's the average and range over the past 10 years
Month …. Average …. St Dev …. Coeff of Var Jan …. 2,574,205 …. 180,877 …. 7.0% Feb …. 2,368,451 …. 151,637 …. 6.4% Mar …. 2,187,398 …. 63,446 …. 2.9% Apr …. 1,771,733 …. 61,469 …. 3.5% May …. 1,544,569 …. 35,778 …. 2.3% Jun …. 1,516,605 …. 73,911 …. 4.9% Jul …. 1,665,807 …. 64,386 …. 3.9% Aug …. 1,707,818 …. 86,833 …. 5.1% Sep …. 1,493,161 …. 59,223 …. 4.0% Oct …. 1,597,917 …. 74,245 …. 4.6% Nov …. 1,780,972 …. 77,030 …. 4.3% Dec …. 2,310,140 …. 121,319 …. 5.3%
Notice anything? NG demand is hyper-seasonal, it has done nothing over the past 10 years, and its peak periods of variance are in the winter and (past 6 or so years) the summer.
There is reason in gas trading desks spending as much as they do on anything outside of salary upon the securing of meteorological services. A third of all desks have their own meteorologists, a third of those have meteorological teams.
NG is used for everything from space-heating fuel to the feedstock for the wrapper of beef-jerky you'll have tomorrow morning. What's rather critical in trading gas is understanding that demand can be bifurcated - seasonal and non-seasonal - and the seasonal runs a 31 beta to non-seasonal, on average.
Gas demand is industrial (including plant-feed for NGL stripping and refineries), power generation, residential, commercial, pipe in-kind, and general loss to the ether.
Gas trading is weather, weather, and a combination of the first two (well, at least 90% of it).
Those who have been reading me know I've been short over the span of two administrations, which dovetails into my ability to provide the above 29-month review of NG without the previously-requisite apologies for the specious bullish calls that so many others should be manacled by.
UNG has zero intrinsic value. It carries gas throughout time indefinitely, and as such continually accumulates the NG forward curve's cost of carry. UNG can achieve sustained periods of price advancement, in so far as the price of prompt NG outpaces the cost of storage. But overtime, price appreciation will lose out to a dominatingly positive storage cost.
I cannot emphasize enough how volatile prompt natural gas prices are. They are subject to roughly 156,783 degrees of freedom, ranging from the vertical instabilities in the Caribbean Sea to mountain-top coal mining regulations in the US. Casual analysis in this market will kill you if you don't take advantage of your luck at the right time.
NG is in a massive S/D imbalance, has been since mid 2008. As we get into winter, especially Q1, if we don't see supplies come off substantially, we will need to go find the price that accomplishes just that. There are trading opptys in this, just like today, as the market feels a little short and we're working that off. As it stands right now, absent the imminent arrival of shale declines that FINALLY start to impact the net (which I am not anticipating over the next 6 months) any run higher in price is absolutely positively bearish as hell. This could obviously change as the 156K degrees of freedom will shift through time, but higher NG prices are not what this market needs.
Well, here's the good news. Bill, you need to see the aggregate build from Sep 25 through Oct 31 restrained to 62 Bcf to nail your sagacious forecast.
But here's the bad news, early estimates for this week reported next sit between 80 and 85 Bcf. So, very likely you're already dead wrong, we just don't know it yet (given that next week's report is for gas-week ending today).
Natural Gas Production Decline May Have Started In September [View article]
Production isn't falling. Bentek reported a new all-time record high dry production level of 65.0 Bcf/day in late October; we've been within a few tenths of Bcf/day of that ever since.
Price paints the picture with respect to short-term production trends and we would not be off 11% in the past week in the JAN contract if those of us in the know had reason to understand a budding production decline. Further, and more importantly than the flat price indication, as of Friday, JAN once again trades contango to APR - for the first time since late September. Additionally, all contracts on the NYMEX curve, from the prompt JAN 13, all the way out to the DEC 2024 contract fell below their 100 DMAs last week, for the first time since mid summer.
These are not the price developments of a market that spies budding production declines.
If you're relying upon the EIA Monthly Nat Gas Prod Report (EIA 914), you are at a severe informational disadvantage if you're trading the price of NG.
Natural Gas Bottom Has Yet To Be Reached [View article]
"There is a strong surplus of natural gas in storage which is only growing due to the fact that we are entering another injection season soon."
This sentence establishes this author's misunderstanding of this commodity.
We aren't "entering another injection season soon", we're in the singular annual injection season, which we entered in April and will exit in early November.
The storage surplus is not growing, in fact its quite impressively shrinking. Ergo, price developments over the past 60 days, like the OCT/NOV and OCT/JAN spreads.
In the 35 years of monthly EIA storage data, back to 1976, no year has seen aggregate storage injections APR through mid JUL lower than 2012.
The fundamental picture painted in this article, an Editor's Pick no less, is wholly flawed. I challenge the author in the event of any other conclusion.
There will be no new lows. We may very well go trade $2.500-$2.600-$2.700 again, but the lows are in.
Estimating the Breakeven Costs of Shale Gas [View article]
Papa, your contributions are our gifts. Thanks for the leg work here.
I think I may take a very different approach to this topic than most traders in this space: I don't spend a great deal of time modeling this. Why? Because I actually view any modeled solution as a burden, as it implies that the solution is static. And it most certainly is not. The numerator shifts like the hormones of pre-teens and the denominator is just this side of a wild-a** guess. Further, the massive expansions of productivity at the rig site, at the well site, etc, further the dynamics of all of this.
Calendar strips in 2015, 2016, 2017, and 2018 closed tonight at 5.77, 5.96, 6.13, and 6.30, respectively. Cal 2022, the furthest strip, still doesn't have a $7-handle, closing at 6.96.
This tells me something. Either the claims that prices are wildly under costs are right, or they're not. And if they are, then nothing but riches await those who believe it.
Time to Bet on Natural Gas ETFs and Stocks [View article]
This is because of contango. The Oct 1994 - Dec 1994 spread on the date of the low was $0.61, virtually all of the return indicated. So, you're not indicating the return for gas investors investing in the prompt contract in the 2nd half of 1994, but actually the carrying costs of gas over the period indicated.
A revised table indicating the true return for any investment in the actual contract that made the high on the date indicated.
High Date …. 1 …. Price …. Date of Low …. 2 …. 3 …. 4 …. 5
10/26/94 …. Dec94 …. 2.031 …. 09/23/94 …. 2.014 …. -0.61 …. 0.8% …. 44.0%
12/21/95 … Jan96 … 3.448 … 08/02/95 … 1.815 … -0.393 … 64.2% … 143.0%
12/20/96 …. Jan97 …. 4.573 …. 09/04/96 …. 2.16 …. -0.396 …. 75.0% …. 159.7%
10/27/97 …. Nov97 …. 3.785 …. 08/06/97 …. 2.454 …. -0.103 …. 43.3% …. 61.3%
11/06/98 …. Dec98 …. 2.553 …. 09/02/98 …. 2.157 …. -0.507 …. 16.9% …. 54.6%
10/27/99 …. Jan00 …. 3.092 …. 09/02/99 …. 2.628 …. -0.158 …. 16.3% …. 25.1%
12/27/00 … Jan01 … 9.979 … 08/15/00 … 4.353 … -0.123 … 83.0% … 135.9%
10/31/01 …. Dec01 …. 3.291 …. 09/26/01 …. 2.633 …. -0.803 …. 22.3% …. 79.8%
12/18/02 …. Jan03 …. 5.278 …. 08/07/02 …. 3.554 …. -0.894 …. 39.5% …. 98.5%
12/12/03 …. Jan04 …. 7.221 …. 09/26/03 …. 5.071 …. -0.641 …. 35.3% …. 63.0%
11/03/04 …. Dec04 …. 8.752 …. 09/10/04 …. 6.364 …. -1.794 …. 31.9% …. 91.5%
10/25/05 … Nov05 … 14.338 … 08/01/05 … 8.739 … -0.589 … 49.5% … 76.0%
11/29/06 … Jan07 … 8.871 … 09/27/06 … 7.644 … -3.444 … 14.9% … 111.2%
11/01/07 …. Dec07 …. 8.637 …. 08/27/07 …. 7.52 …. -2.14 …. 13.8% …. 60.6%
12/28/09 …. Jan10 …. 5.99 …. 09/03/09 …. 4.819 …. -2.309 …. 21.8% …. 138.7%
1-Prompt Contract @ Given High Date
2-The Price of (1) at Time of Given Low
3-Spread of (1) to Prompt at Given Low in USD
4-True Return
5-Indicated Return
So the actual average return 1994-2007 and 2009 is cut by 5,430 of the 8,835 basis points indicated.
This is important to know: the substantial majority of the indicated 88.4% return is actually the carrying cost of shepherding the prompt contract from the indicated low date to the indicated high date. In 5 of the years, the cost of carry was over 70% of the indicated return, 1994, 2001, 2006, 2007, and 2008.
The table published is deeply misleading.
Why Natural Gas Storage Numbers Are Misleading [View article]
1995 22,206,889
1996 22,609,080
1997 22,737,342
1998 22,245,956
1999 22,405,151
2000 23,333,121
2001 22,238,624
2002 23,007,017
2003 22,276,502
2004 22,388,975
2005 22,010,596
2006 21,684,641
2007 23,097,140
2008 23,226,612
2009 22,816,303
Demand has not been increasing, in fact we used 1% less gas in 2007 (the last boom year) than we did in 2000. Further, we're used just as much last year as in 1997.
Source: www.eia.gov/dnav/ng/hi...
The message in storage is not about static levels but about the change in those levels.
In the US Gas Economy, at all times, Supply - Demand = Storage. Storage is the supply/demand balance. This greatly helps us understand the fundamentals of this market in the presence of debates surrounding supply and demand levels.
Since the start of the "traditional" build season on Apr 1, through the latest data we have at Aug 20, we have built 1,392 Bcf. This, rather Shakespeareanly, matches to the Bcf, the 5-yr average build for the period Apr 1-Aug 20 at 1,392 Bcf. This is why the surplus to the 5-yr average on Apr 1 and Aug 20 are equal at +177 Bcf.
The bearish part is NOT that were at +177 to the 5-yr average, but that we built at the 5-yr average pace during what will certainly become the hottest summer for the US on record.
Given that we know Storage = Supply - Demand, a 5-yr normal build during the hottest summer on record is quite bearish indeed.
Falling Supply to Boost UNG [View article]
Bill, no comments here whatsoever? Do you concede some likelihood that you've got the aggregate production picture misunderstood?
Falling Supply to Boost UNG [View article]
You stated: “I have not changed my forecast on storage going to the 5 year average and prices will likely be a lot higher over the next 6 weeks.”
Do you realize what sort of historical outcome this would prove to be? Stocks on Sep 10 equaled 3,267 Bcf. The 5-year average on October 31 is equal to 3,476 Bcf.
For US Storage to equal the 5-year average on October 31, we would have to see injections limited to a total of 209 Bcf for the remaining 7 reports covering the period from Sep 11 to Oct 31.
209 Bcf as in about twice what we saw just in last week’s report alone.
209 Bcf as in an average of 30 Bcf/week.
A look at historical injections for the period Sep 11 – Oct 31, in Bcf:
1994 …. 348
1995 …. 392
1996 …. 440
1997 …. 425
1998 …. 405
1999 …. 356
2000 …. 441
2001 …. 434
2002 …. 254
2003 …. 565
2004 …. 429
2005 …. 426
2006 …. 337
2007 …. 439
2008 …. 459
2009 …. 343
The 5-year average is a build of 401 Bcf. The record-low injection is 254 Bcf in 2002, the next lowest is 337 Bcf in 2006.
You are asserting that we will take out an already outlying record-low injection pace for the balance of the period through October 31 and one that is literally *half* of the 5-yr average clip.
Are you insane? Does nothing appeal to you with respect to preserving your reputation following this?
I echo and augment Papa’s thoughts: you are an especially dangerous voice in the natural gas market.
Falling Supply to Boost UNG [View article]
What's most frustrating about this: there are precious few things in the NG market that are "easy"; one of those rare things is tracking storage against temperature. There are plenty of ways to get tripped up in this market, misunderstanding what *weather-adjusted* storage is communicating should never be one of them. Bill has paid readers here a deep disservice, only accentuated by his pusillanimous silence.
Falling Supply to Boost UNG [View article]
I find general agreement with your sentiments. However, when applying the idiosyncrasies of this situation, they loose purchase. Bill is not being insulted here, Bill is being presented with facts and doing two things with them: 1) ignoring them and 2) selling a product predicated upon intellectually dishonest work.
Bill has been selling (the operative term here) the story that the supply of natural gas is falling for well over a year. His first installment that I know of is from June 2009.
www.financialsensearch...
His second, more focused iteration is from 13 months ago.
www.financialsensearch...
It is this extended period of faulty analysis that renders void any suggestion that Bill Powers could be right at this point.
My language is a touch caustic because the man, *who takes people's money in return for guidance through the natural gas space*, clearly refuses to engage in factual discussion. This pushes him towards, but not into, the definition of fraud. Ergo, I feel my treatment of him has been fair.
Bill Powers is not correct. Should the market tighten tomorrow, Bill Powers will still not be correct.
The S/D compositte for NG will change, I fully agree. I've never stated differently in any of my comments. But this is not the winter where that will happen. The demand comps to last year are just far far too steep - we drew 2.1 Tcf Dec 1 - Feb 28 owing to deep-sigma temperatures in very demand sensitive areas and a 4-sigma snowfall for the Mid Atlantic states. I would put the odds of a 2.1 Tcf draw over the same period this year at around a 0.5 Delta - something akin to alien abduction insurance. And once we're done with the core of winter, we've got the demand comps from June 1 - Sep 30 this year to battle.
I believe in one religion - price. Price will re-balance this market. Hopefully this winter will do it, hopefully we'll get the incredible pain that will be required to consolidate the drilling space and introduce some much needed production discipline. Auxiliary demand will not clear this market over the next 12-24-36 months. Take a look at total annual demand since 1995. Run it against price. Observe the utter lack of elasticities. We need pain to run big and run deep into the producers, kill quite a few of them off, and find the only way to balance this market over the medium term - supply.
Appreciate your kind preface and I will take the beer bet (which is essentially a weather bet) and will be thrilled to face paying you on it, as a $4 trade before Christmas will be a phenomenal gift.
Falling Supply to Boost UNG [View article]
Great work at this site, keep publishing inexact analysis of the natural gas markets (not limited to the production of Bill Powers) and silence those with the facts. Smart. If you find the feedback too caustic, toughen up, you stand to actually learn something from it.
Falling Supply to Boost UNG [View article]
The Problems Plaguing Chesapeake Energy [View article]
Natural Gas: Where Bullish Dreams Go to Die? [View article]
Month …. Average …. St Dev …. Coeff of Var
Jan …. 2,574,205 …. 180,877 …. 7.0%
Feb …. 2,368,451 …. 151,637 …. 6.4%
Mar …. 2,187,398 …. 63,446 …. 2.9%
Apr …. 1,771,733 …. 61,469 …. 3.5%
May …. 1,544,569 …. 35,778 …. 2.3%
Jun …. 1,516,605 …. 73,911 …. 4.9%
Jul …. 1,665,807 …. 64,386 …. 3.9%
Aug …. 1,707,818 …. 86,833 …. 5.1%
Sep …. 1,493,161 …. 59,223 …. 4.0%
Oct …. 1,597,917 …. 74,245 …. 4.6%
Nov …. 1,780,972 …. 77,030 …. 4.3%
Dec …. 2,310,140 …. 121,319 …. 5.3%
Notice anything? NG demand is hyper-seasonal, it has done nothing over the past 10 years, and its peak periods of variance are in the winter and (past 6 or so years) the summer.
There is reason in gas trading desks spending as much as they do on anything outside of salary upon the securing of meteorological services. A third of all desks have their own meteorologists, a third of those have meteorological teams.
NG is used for everything from space-heating fuel to the feedstock for the wrapper of beef-jerky you'll have tomorrow morning. What's rather critical in trading gas is understanding that demand can be bifurcated - seasonal and non-seasonal - and the seasonal runs a 31 beta to non-seasonal, on average.
Gas demand is industrial (including plant-feed for NGL stripping and refineries), power generation, residential, commercial, pipe in-kind, and general loss to the ether.
Gas trading is weather, weather, and a combination of the first two (well, at least 90% of it).
Those who have been reading me know I've been short over the span of two administrations, which dovetails into my ability to provide the above 29-month review of NG without the previously-requisite apologies for the specious bullish calls that so many others should be manacled by.
Thanks for the comment.
Falling Supply to Boost UNG [View article]
I have an article at Business Insider that you would likely do well to read.
www.businessinsider.co...
UNG has zero intrinsic value. It carries gas throughout time indefinitely, and as such continually accumulates the NG forward curve's cost of carry. UNG can achieve sustained periods of price advancement, in so far as the price of prompt NG outpaces the cost of storage. But overtime, price appreciation will lose out to a dominatingly positive storage cost.
I cannot emphasize enough how volatile prompt natural gas prices are. They are subject to roughly 156,783 degrees of freedom, ranging from the vertical instabilities in the Caribbean Sea to mountain-top coal mining regulations in the US. Casual analysis in this market will kill you if you don't take advantage of your luck at the right time.
NG is in a massive S/D imbalance, has been since mid 2008. As we get into winter, especially Q1, if we don't see supplies come off substantially, we will need to go find the price that accomplishes just that. There are trading opptys in this, just like today, as the market feels a little short and we're working that off. As it stands right now, absent the imminent arrival of shale declines that FINALLY start to impact the net (which I am not anticipating over the next 6 months) any run higher in price is absolutely positively bearish as hell. This could obviously change as the 156K degrees of freedom will shift through time, but higher NG prices are not what this market needs.
Falling Supply to Boost UNG [View article]
But here's the bad news, early estimates for this week reported next sit between 80 and 85 Bcf. So, very likely you're already dead wrong, we just don't know it yet (given that next week's report is for gas-week ending today).
Bill, welcome to obsolescence.
Natural Gas Production Decline May Have Started In September [View article]
Price paints the picture with respect to short-term production trends and we would not be off 11% in the past week in the JAN contract if those of us in the know had reason to understand a budding production decline. Further, and more importantly than the flat price indication, as of Friday, JAN once again trades contango to APR - for the first time since late September. Additionally, all contracts on the NYMEX curve, from the prompt JAN 13, all the way out to the DEC 2024 contract fell below their 100 DMAs last week, for the first time since mid summer.
These are not the price developments of a market that spies budding production declines.
If you're relying upon the EIA Monthly Nat Gas Prod Report (EIA 914), you are at a severe informational disadvantage if you're trading the price of NG.
Natural Gas Bottom Has Yet To Be Reached [View article]
This sentence establishes this author's misunderstanding of this commodity.
We aren't "entering another injection season soon", we're in the singular annual injection season, which we entered in April and will exit in early November.
The storage surplus is not growing, in fact its quite impressively shrinking. Ergo, price developments over the past 60 days, like the OCT/NOV and OCT/JAN spreads.
In the 35 years of monthly EIA storage data, back to 1976, no year has seen aggregate storage injections APR through mid JUL lower than 2012.
The fundamental picture painted in this article, an Editor's Pick no less, is wholly flawed. I challenge the author in the event of any other conclusion.
There will be no new lows. We may very well go trade $2.500-$2.600-$2.700 again, but the lows are in.
Estimating the Breakeven Costs of Shale Gas [View article]
I think I may take a very different approach to this topic than most traders in this space: I don't spend a great deal of time modeling this. Why? Because I actually view any modeled solution as a burden, as it implies that the solution is static. And it most certainly is not. The numerator shifts like the hormones of pre-teens and the denominator is just this side of a wild-a** guess. Further, the massive expansions of productivity at the rig site, at the well site, etc, further the dynamics of all of this.
Calendar strips in 2015, 2016, 2017, and 2018 closed tonight at 5.77, 5.96, 6.13, and 6.30, respectively. Cal 2022, the furthest strip, still doesn't have a $7-handle, closing at 6.96.
This tells me something. Either the claims that prices are wildly under costs are right, or they're not. And if they are, then nothing but riches await those who believe it.
I tend to think otherwise.