Rice_Rocket_Ocho_Cinco

My current natural gas trade

here is a s-t update on ng for you from a fellow trader:

July settled at 3.844, +0.083 on the day after trading between a range of 3.743 and 3.95. Volume was very healthy at 72,060 July ice contracts. The EIA reported a +94 build which expands the y/y surplus from +622 to +631, and +482 to the 5yr avg. This number was in line against the street estimate of +95. This week's report increases the 4 week rolling y/y s/d balance from +3.55 to +3.57. Days of supply y/y decreases from +15.37 to +14.07. As expected July penultimate was collared between 3.75 and 4.00. Technically, the daily chart remains above the 18 & 40dma and sstochs continue to build. Macd lead line is hooking back up and has crossed the signal line of which both are now in the positive zone. The rsi is lagging the others in neutral territory at 50. Resistance unfolds at 4.053 (coal equiv. in Aug, daily pvt., pennant high) & support resides at the 3.846 daily pivot. As long as the market continues to see upticks and higher settles the potential for the 40/100 dma 'golden cross' improves (.025 away). What does this mean?...Looking back on the daily continuation chart this potential golden cross is similar to the cross of 10/26/07. After the '07 cross the prompt ng contract gained 20% before fundamentals pulled it back within a couple of weeks. Why should prices pull back on such a bullish technical achievement?.....Being in the mildest weather demand month of the year with record inventory levels it is hard to refute why prices should not make new lows. In addition, prices must go lower to uninterrupt coal to gas substitution, disincentivize producers from turning rigs back on, and keep the LNG from flooding the U.S. markets. As convoluted as this sounds the cure to low prices is lower prices.

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

Great article. Check out my blog for more short term fundamentals on ng. I need to learn how to post my charts. SA readers are visual.

My Current Natural Gas Trade

Mad Hedge Fund Trader,
How many times are you gonna post this f-ing reply????


On Jun 25 08:27 AM Mad Hedge Fund Trader wrote:

> Here another reason to avoid NG. The Potential Gas Committee of the
> American Gas Association published a report that US reserves have
> jumped by 35% to 1,836 trillion cubic feet, thanks to the huge discoveries
> of new shale fields since 2006. Also contributing are the new fracturing
> technologies, which I had a hand in pioneering myself ten years ago.
> That means our natural gas reserves can now meet 100 years of current
> consumption, and are roughly equivalent to Saudi Arabia’s crude reserves
> on a BTU basis. Natural gas futures dove 26 cents to $4.23, and the
> ETF (seekingalpha.com/symbo...) gave back 4%. A buddy of
> mine close to the committee warned me that something like this was
> headed down the pike, which is why I sent readers a warning two weeks
> ago to cash out at $4.30 (see www.madhedgefundtrader...).
> When you only see chart driven traders buying a commodity and the
> industry insiders selling the Hell out of it, you want to stay away.
> Bewildered technicians were last seen feverishly searching for Hainesville
> on Google. It was their models that sucked $3 billion into UNG over
> the last three months. This is great news for the big consumers of
> NG, like the utility industry and the petrochemical industry. It
> will also give a shot in the arm to Boone Pickens’ plan to shift
> our transportation system to NG (see www.madhedgefundtrader...).
> Even the ratio, pairs, and mean reversion traders have been burned
> by NG this year. As cheap as NG is, a Saudi Arabia’s worth of supply
> hitting the market could easily knock the price down by half from
> here. As extreme as the move in the oil/gas ratio is at 18:1, we
> could be breaking new ground.

Natural Gas: Prices Remain Firm Despite Bearish News

Yes you are right the weight of horizontal rigs increased significantly from 10% 5 yrs ago to 40% at the high in 8/19/08.

My thought is regardless of the rate of supply response they will keep shutting in rigs in order to rebalance supply-demand. If this must come to the point where horizontal rigs are 75% of total gas rigs so be it. As convoluted as this sounds the cure for low prices is LOWER prices. Prices must go lower to uninterrupt coal to gas substitution, disincentivize producers from turning rigs back on, and keep the LNG from flooding the U.S. markets.

In my coal to gas substitution model that number is 4.05. That should serve as the fundamental ceiling on ng prices.


On Jun 24 09:03 AM Shale Gas wrote:

> I meant the number of horizontal wells as a percent of all wells
> drilled. I don't have the numbers in front of me but something like
> 20% of all wells drilled in NA are now horizontals. Five years ago
> it was maybe 5%. Horizontal wells are much more productive than verticals,
> so even though the rig count has dropped, supply may adjust slower
> than the market thinks given the productivity.

Natural Gas: Prices Remain Firm Despite Bearish News

Shale Gas,

We are seeing some supply response. You will not see it in the EIA monthly report since it is on a 2 month delay, but my model is lower my about 2 bcf/d since the high of 58 in Feb (dry prod.)

Also, horizontal rigs are lower by 153 y/y as of last Fri. What do you mean by increased?


On Jun 23 07:07 AM Shale Gas wrote:

> Here's something to consider on the supply side. Natural gas production
> has not fallen yet despite the lower rig count because the number
> of horizontal wells has increased relative to total wells drilled.
> These horizontal wells are as much as four times as productive as
> vertical wells.

Follow the Piling into Natural Gas

you say it as if UNG has nearly 100% of the weight on nymex NG. that is just about as ridiculous as your 3.30 july settlement prediction. +114 build on today's eia report was bearish indeed, but to say july will lose another 20% in a 1.5 weeks is too aggressive. yes, the market price has disconnected from current s-d fundamentals, but that's what happens when the technicals take over.....


On Jun 18 11:11 AM skrangeo wrote:

> July natural gas will probably end up in the low $3's.
>
> UNG has been artificially propping the price of July contracts up.
> However, when you combine the slaughter today (114 bcf inj vs 105
> expected) and the fact that UNG is rolled into August and out of
> July contracts, the lack of UNG buying into July contracts will let
> the 'true' market dictate the price of natural gas.
>
> I wouldn't be surprised to see July contracts end at $3.30 by expiration.