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Five Thousand Over Libor
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Energy trader with 11 years of experience in Natural Gas and Interest Rate markets. Manage a small trading organization, in the $25-50 million asset range, responsible for both consumption/production hedging and proprietary strategies.
  • The Natural Gas Declining Supply Argument Refuted in Three Pictures 2 comments
    Sep 8, 2010 12:11 PM | about stocks: UNG, SJT, CRT, MTR

    NOAA's National Climactic Data Center (NCDC) has updated their Summer 2010 Temperature map this morning, for all realized temperatures June 1 - Aug 31.  Here it is.

    The last time we had temperatures anywhere near these levels over the US was in Summer 2006.  That brings us to picture two: 

    And finally, for the killshot, given the substantially warmer conditions, most especially population-weighted, of 2010 vs. 2006, how did storage injections over the June 1 - Aug 31 period fair those two years?

    So, we have:

    • A remarkably warmer summer in 2010 over 2006.  Quantitatively speaking, NOAA's CPC Population-Weighted Cooling Degree Days for the US totaled 1,020 for the Jun-Aug 2010 period.  This is 5.9% higher than the 2006 reading of 963.  Another quantity: 59.6 million people had all-time record hot summers. 
    • A 71 Bcf, or 0.8 Bcf/day, larger storage build 2010 over 2006. 

    Given that we know Storage = Supply - Demand, welcome to the end of current-production-is-in-decline argument. 

    For those seeking an unperturbed exposure to NG prices, look into Royalty Trusts such as SJT, CRT, or MRT.  Unlike UNG, these names don't perpetually "carry" natural gas and therefore have limited if any short-storage exposure. 

    Disclosure: No holdings in any tickers listed.
    Stocks: UNG, SJT, CRT, MTR
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  • Wiskey
    , contributor
    Comments (27) | Send Message
    First of all, Storage != Supply - Demand. Because the purpose of the Storage is not to balance the Supply all the time year round, but to fill enough gas during injection season, so those fucked banksters have enough btu's to heat their asses during winter season, while they play poker spending taxpayers money. Second of all, where are the Supply arguments in the article? I only see the temp charts and nothing more. Oh, yeah, I see, one can presumably derive here some conclusion stemming from the "warmest" or "coolest" seasons, but aren't we all tweak our thermostats in response to what happens on #1 W St. ? Big deal buddy?
    8 Sep 2010, 10:42 PM Reply Like
  • Spielmeister
    , contributor
    Comment (1) | Send Message
    The Supply argument is that in the face of greater cooling demand the natural gas industry was still able to inject more into storage than ever before. A simple algebraic reworking of the equation produces
    Storage + Demand = Supply. Plug in the numbers from the EIA and you can see the increase in Supply/Production. If production was truly slacking off (the Declining Supply argument) the injection increase would not have been possible. Is this really that hard for you to understand?
    9 Sep 2010, 01:25 AM Reply Like
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