Mark Anthony

Despite Dedicated ETFs, No Reliable Way to Play Natural Gas

The natural gas storage capacity of the WHOLE NATION, is roughly 4000 BCF (billion cubic feet). Each thousand cubic feet of natural gas is worth $3.50 as I speak now. So the value of all natural gas stored in all facilities is no more than $14B. Even if natural gas price doubles from here, there can be no more than $14B profit made in the whole sector of natural gas commodity, and that is a theoretical absolute top limit of possible profit.

The majority of profit that natural gas longs can make, will come from the shorts who bet big on the wrong direction, not from the appreciation of the commodity itself. Therefore expect extreme volatility and extreme price swing on both sides. I am expecting an explosive rally up, as natural gas is deeply over sold yet many shorts actually believed natural gas price can go below ZERO.

Has Natural Gas Hit Bottom?

Wiskey:

Accusing me, a regular Seeking Alpha contributor, as lying publically, is a very serious matter. Seeking Alpha has a very strict full disclosure policy and they have the real name and address of contributing authors and they hold the authors up to the truth of their full disclosure statements at the end of each article.

Pay me a reasonable fee, and I can fax a copy of my trade records for you to see. I did entered a small UNG position in Sep., 2008 at $33.00. But I decided I did not like it and sold it at about $35 near the end of September. I had no UNG position until I started to purchase again in March, 09 at the $15.50 level. It's the truth.

I did mention shorting CL. I meant to stimulate some thoughts in that direction. I insist that CL is way over-priced and it should go down over long term. I never had any CL short position so far, because holding some of my favorite long positions are way much more attractive than shorting any stock at all. There are tons of good longs today, and not too many good shorts.

I twice mentioned CL as a potential long term short, on De. 26, 08 and Jan 25, 09. In hind sight, had some one shorted CL at these two dates, the end results would be flat, i.e., tasteless. Real long term it should go down when the weak fundamentals are reflected in its quarterly revenues.

On May 14 05:06 PM Wiskey wrote:

> I think you are lying pal. You started "loading up" when UNG was
> $33. Here is from your so called analytic article:
> seekingalpha.com/artic...
>
>
> ----------------------...
> I am seeing United States Natural Gas Fund (seekingalpha.com/symbo...),
> as an excellent buy here and I see it less affected by turbulence
> in the general market. I bought UNG at around $33 myself. I also
> suggest buying NGAS (seekingalpha.com/symbo...) as it is
> an unconventional natural gas play, with a nice ticker name others
> are jealous for.
> ----------------------...
>
> Reading your passages about Einstein style shaving as a basis to
> short consumer staples stocks, makes me just wonder: are you really
> that stupid, or it just you trying to look that way?
>

Has Natural Gas Hit Bottom?

I guess besides forgetting about Barnett, Haynesville etc., you also forget to mention there is a gigantic natural reserve on the planet of neptune and uranus, enough for humanity to consume for a hundred billion years. It may be a bit costly to ship them to earth though :-)

The point is you can not talk about any supposed to be natural reserve, WITHOUT talking about it in the context of current price. At current natural gas price, you CAN pretty much FORGET all about Barnett and Hayesville, because it is far too costly to produce natural gas from these shale gas sources if the natural gas stay at current low level.

This is the beauty of commodities investment. You buy something below cost and you can just sit back, knowing for certainty that its price MUST recover and go to a level which is above cost.

On May 14 08:58 AM tuj wrote:

> You forgot about shale. How you can discuss NG without discussing
> what's happened in Barnett, Haynesville, etc is beyond me. LNG's
> last stop is the US if all other diversions are closed. The real
> story is the hedged positions of some of the majors.

Has Natural Gas Hit Bottom?

Wiskey:

I checked my trade record. I did twice buy a few hundred shares of UNG in early September, at about $33 per share. I sold them all in the second half of September, for about $35. I never got back in UNG until I bought 100 shares on March 17 for $15.50 per share. That was my entry. I now have almost a hundred times more shares than my initial timid purchase of 100 shares at $15.50.

If you want to see the detailed trade record of my account, pay me a reasonable fee and you can see it all.

On May 14 01:12 PM Wiskey wrote:

> You are the one recommended UNG when it was around $30.
> Funny - a massive load on a position which lost 50%...
>
> On May 14 10:44 AM Mark Anthony wrote:

Has Natural Gas Hit Bottom?

Thomas:

Finding natural gas reserve is one thing. Producing them is another. I can also claim I found trillions of trillions of cubic feet of natural gas. It's on neptune and NASA claims the credit of discovery. But it's not going to bring natural gas price down.

The so called new natural gas discover has been known for a few decades now and is NOT news. They are shale gas. They are extremely difficult and uneconomical to produce, until recently technology progress made it possible and $15 natural gas price made it profitable. Current natural price is simply too low to allow the shale gas to be produced.


On May 14 12:22 PM Thomas J. Gordon wrote:

> What about that wsj article on all those new domestic (u..s) natural
> gas finds in lousiana? online.wsj.com/article...
> Some of the finds they had there were huge. And natural gas is less
> exportable than oil. I got out of domestic energy trusts because
> of that article. Plus without that Amarinth guy, the natural gas
> market has never been the same.

Has Natural Gas Hit Bottom?

I don't know why you think that is funny? You must mis-understood what I meant. UNG is now constitute more than 12.5% of my total portfolio value. All other positions combined are less than 87.2%. My UNG positions are very profitable. They are NOT at 1/8th price of my cost bases. They are about 15% above water in my portfolio.

I agree on the price tripling part. I think it can actually quadruple from here within 12 months, not just triple.

On May 14 11:13 AM yellowhoard wrote:

> Funny you should say that you are 1/8th in on UNG. Me too, as of
> this AM. I"m looking for a three bagger by December.

Has Natural Gas Hit Bottom?

Andrew:

I absolutely agree that natural gas price has bottomed. I am actually even more optimistic than you are, in the natural gas price recovery. I started to load UNG at $15.50 on the way down, and then massively loaded up tons UNG in the $13 to $14 price range. They are more than 1/8 of my portfolio now.

A few points you have not touched on: The cost of natural gas production. Natural gas production in the USA boomed in recent two years due to the development of shale gas, which is expensive to produce and the production per well start to decline more quickly than conventional natural gas wells. Natural gas price needs to be at least $13 for the shale gas production to be profitable. The current price is too much lower than intrinsic cost for producers to have any incentive to drill replacement wells.

If there are any drill rigs left at all, they are only there because the producers predict the gas price will come back to double digits soon. If they don't see it that way, there won't be a single drilling rig.

Further, you should make the cost argument on LNG importation as well. Simply because you have build some LNG importation terminal does not mean LNG ships from all over the world will come to your port. It depends on price. US LNG importation has collapsed from the high just two years ago. The LNG ships are expensive to build and have limited shipping capacities. Other countries in the world are paying much higher prices for the LNG.

I look around and see nothing else that has as much a certainty as UNG, to go up quadruple from current level, in as short a time period as 9 months. It's time to massively load up UNG.

seekingalpha.com/autho...