skrangeo

Bullish Divergence in Natural Gas

aren't you the same guy who said that

A) the political disturbances in Iran would drive up NG prices because of Iran's vast natural gas reserves (LOL) and

B) the price effect on natural gas due to the american dollar (LOL x 2)


Now, to add to your resume of information, you saw a video of a meteorologist on Accuweather.


Solid

Natural Gas: Another Great Thing from a Lobby Near You

clearly put in place by "oil" companies. Because, of course, they don't produce natural gas themselves.

LOL

I love the "oil company" conspiracy theories. Love it.

These are the same "oil companies" who are buying the "100 mpg" engines off of the market before the public knows about it. Hardy har har!


On Aug 02 05:43 PM ripskii wrote:

> These license fees for conversions are clearly protectionist hurdles
> put in place by the oil industry to prevent the use of NG. I wonder
> if either Sen 1405 and HR 1835 bills address this issue? Hopefully
> those writing these bills are aware of the problem these fees present
> to conversion to NG use and will remove them in any legislation they
> propose.

Natural Gas: Another Great Thing from a Lobby Near You

brilliant! just think of all of the new 18 wheelers powered by 260 HP V6's!

And what about your standard "work" truck? How many 4 cylinder trucks do you see hauling trailers and trucks loaded down with equipment at construction sites?


Yes, only 4 cylinders and 6 cyclinders is OBVIOUSLY the solution

/deep thoughts by Jack Handy


On Aug 02 12:38 PM mouth wrote:

> One simple soluion. Only allow new 4 and 6 cylinder vehicles to be
> produced for the US market. Very simple.

Coal vs. Natural Gas: Which ETF Will Win the Battle?

Let's not get ahead of ourselves. I mean, coal vs. natural gas. We're not even comparing apples to apples. On one side, you have a fossil fuel. On the other....uh...

"TOM BROKAW: Oh, it’s what, between 100 and $200,000.

REP. NANCY PELOSI: No, no, it was between 50 and $100,000, and it’s part of an, you know, entrepreneurial package. This is the package we sign up for, this is what they invest in. But that’s not the point. I’m, I’m, I’m investing in something I believe in. I believe in natural gas as a clean, cheap alternative to fossil fuels."

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

The $30k/acre were for areas like the Haynesville and Tier 1 Barnett. And those were also the peak prices in the first half of 2008 when natural gas was $9+ and ramping up.

A large amount of that exploration, $20k+ acreage was purchased on 2 year leases. With purchases made in the first half of 2008, we're a year into the ticking clock and companies have a lot of leases *they have to* drill so that they can be HBP (held by production).


On Jul 11 05:38 PM Don-n-ABQ wrote:

> Where are they leasing for $30k/acre? I just got an offer in the
> mail for either $300 p/a and a 1/8th RI; or $250 p/a and a 3/16th
> RI.
>
> That is a long was from $30k. Guess my mineral rights are in the
> wrong damn place (Roger Mills County, OK).
>

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

As I've stated before, I'm bullish on natural gas long term. Short term, it's just not there.

There is clearly NO catalyst for upward movement in the next 60-120 days (IMO) because of weak demand, continued supply, and (most importantly) storage issues. In the next 60-120 days, the physical limitation on natural gas storage (injection pressures, full storage before the injection season is over, etc.) are going to push Henry Hub prices sub $3, probably into the mid $2's, and possibly lower than that.

It's the same situation you see in the Rockies. Excess supply and nowhere for it to go. Remember, there are only 2 things you can do with natural gas production: burn it or store it. The Rockies has too much supply vs. the pipeline capacity to get it out of the Rockies region. You have 6 molecules of gas fighting for 3 molecules of space. The solution? Prices are driven down until 3 molecules "voluntarily" drop out of the equation (read: production is shut in).

This is what is going to happen to spot prices in Aug/Sept/Oct as storage maxes out, injection pressures approach maximum ranges, and the gas has no where to go. Prices will be driven down. This is not going to be permanent. It's not going to be driven down to $2 for the next 12-14 months. But, until the excess storage overhand gets worked off (shut-ins, continued depressed rig count, etc.), there is no fundamental support for a "bottom" right now.


On Jul 11 04:39 PM Mark Anthony wrote:

> Philipp:
>
. Now you tell me who is going
> to endure all the cost to import LNG and sell it at only $2 per MMBTU?
> -carry-trade
>
>
> I think I really want to call a solid bottom of NG price at this
> point, as now there is incentive to burn natural gas instead of coal.
>

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

AMEN.

Leadership deficit is an understatement.


On Jul 10 10:46 AM axelrod608 wrote:

> skrangeo's comments beg the question - WTF are this nation's "leaders"
> doing by ignoring the situation ?? One would think that LNG for auto
> fuel - and cars that burn it - would be a national priority. Unfortunately,
> outside the box thinkers are in short supply at the levels where
> national policy is made.
>
> This nation has, more than any other problem, a leadership deficit.
> We throw money at problems while alternative solutions are in plain
> sight to the astute observer.

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

[Q]UNG is not an investment that is to be held for the above reasons[/Q]

I think UNG has tracked ng somewhat accurately up to this point, but with the popularity of the fund, I think it will veer off course going forward. I see the same scenario happening to UNG that happened to USO. Both are supposed to be tracking the front month of their respective commodities (UNG:natural gas, USO:oil). However, look what happened to USO. Oil went from the $30's in January to over $70 and now sits close to $60. Meanwhile, over the same time frame, USO has not tracked oil very well at all.

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

[Q]The big question is.... how forward looking IS the market on these issues...that all that you said is already priced in to the incredible decline?????[/Q]

The market "forward looking" is priced into the out months which is why the natural gas curve is in such a contango (out pricing greater than near term). But, that doesn't help the near term issues (60 - 120 days). While the out months are "currently" higher, if the supply/demand issue isn't resolved, they will get pushed down just like August contracts currently are. For reference, on Jan 14th August contracts were $5.47. On March 3rd, August was $4.69. On May 19th, August was $4.38. And today, sub $3.50.

The prompt month being driven down is a function of FUNDAMENTALS. And right now, the FUNDAMENTALS are quite bearish. And as more gas goes into storage and PHSYSICAL LIMITATIONS become an issue, watch Henry Hub sink like the Titanic.

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

here's the deal with natural gas (and the reason I've made money buying/selling puts on UNG)

With the boom in prices came a boom in drilling. And, at the higher prices, the exploration plays like the Haynesville were very economic. And along with the drilling came a soaring production increase. And along with everything else came a HUGE drive up in prices for acreage (especially exploration acreage, up from $2k an acre a couple of years ago to around $30k an acre in the hottest areas).

As production soared, and demand dropped (economic downturn, mild weather), oversupply has become a HUGE issue. The storage of natural gas has just literally smashed old records. There is ~30% more natural gas in storage right now than the past 5 year average. Simple economics, supply >>>> demand = huge drop in prices.

As prices have dropped, many areas have become uneconomic. It’s pretty widely known that the breakeven economics for the Barnett is around $5 - $5.50/mcf. Right now, it is around $3.45/mcf. Thus, drilling programs have been slashed all over. The rig count is down 55% since October.

Well, you would think that the major drop in rigs would lower production and help the situation. Unfortunately, here is the kicker. These new shale plays, being drilled up through the use of horizontal wells, are bringing on MONSTER wells. A vertical well in an “average” formation might come on at 1 mmcfd. These new Haynesville wells are coming on at 15-25 mmcfd. So, one new Haynesville well basically take the place of 15 “average” wells. So while the rig count has dropped drastically, the wells coming online right now are so much stronger that production hasn’t hardly been affected.

If that weren’t bad enough, here is kicker #2: most of that high $$$$ acreage was exploration acreage (meaning, no production to hold the leases yet). And, most of those leases were 2 year leases. Now, if you take a section (640 acres), you only need 1 well producing on that lease to hold it. And, at 40 acre spacing, there is the potential per section for 640 / 40 = 16 drill locations. Now, at $30k/acre and 640 acres in a section, you already have $19 million in sunk costs per section. You have literally hundreds of millions (billions?) of dollars tied up in non-producing acreage with a shortly expiring time clock. If they don’t get at least one well drilled and online to hold the lease, they risk losing all of that sunk money.

So, even if wells are uneconomic now, they are still drilling to get one well per section online to hold the lease. This allows them to have that backlog of the remaining 15 locations so that when prices recover, they have access to those reserves. They are willing to drill an uneconomic well today so that they don’t lose the lease that they have already spent tons of money on. And, since they have to keep drilling for this reason, it just continues to add to the current oversupply (regardless of prices).

Having said all of that, we are going to start seeing physical limitations on natural gas storage (you can’t cram 6 lbs of shit into a 5 lb bag). There is already more natural gas in storage in the central region than at the peak of last year (2nd week of November). And, we still have 3.5 months of storage to go! Yikes! Due to this, the price is going to get driven down sharply because there will be nowhere for the natural gas to go. Once natural gas prices get driven down into the low $2s, companies WILL start shutting in production and dropping even MORE rigs. This well help the oversupply get worked off, and only THEN will prices start to turn upwards.

Natural Gas ETF: Nowhere to Go but Up, Yet It Keeps Going Down

It has plenty of room for the downside. I know the last thing anyone wants to talk about is fundamentals, but ZOMG!!! UNG is supposed to track the prompt month of natural gas, and, well, there is ZERO fundamental support (storage/supply/demand) for natural gas right now.

I fully expect the price of natural gas to dip into the mid $2's by October. The producing region already has more gas in storage than at the peak of last year and we still have ~3.5 months of fillup to go. You are going to get physical limitations on injection (you can't put 6 gallons of chit in a 5 gallon bag) and that will drive the spot price down hard (if you want to see how this works, just look at the November - February action on oil prices as storage in Cushing, Oklahoma was maxed out and the nymex price was crushed).

Natural gas still has plenty of downside based on fundamentals.

Why I've Waited to Buy Natural Gas

UNG trading halted today!

Why I've Waited to Buy Natural Gas

nice work. I've been railing on the other seekingalpha article authors for their factless, sunshine pumping articles on UNG without any regard to fundamentals (read: storage/supply/demand). Some have mentioned political tensions in Iran as a natural gas spike catalyst (LOL...Iran!)...others have mentioned the 18-1 ratio (without considering the underlying reason of WHY it has diverged...the emergence of the shale plays!). it's nice to see someone stepping back and not getting caught up in the "herd" mentality.

I work in the oil/gas business and have made two strong trades in UNG puts (buying the puts and selling them for a profit as UNG has droppped, one for a 100% gain and then selling yesterday for a 65% gain). All of the information is there for the public to see (lower demand, excess storage, supply that has held in great even considering the 55% drop in rig count) yet they've continued to pump UNG.

It's going to take the next 60-120 days before natural gas bottoms out. Their is already more gas in storage in the producing region than at last year's peak (2nd week of November). Henry Hub prices could get crushed in the upcoming months as the producing region storage maxes out (read: physical limitations on injecting storage gas) and the spot price is driven down. It is going to take situations like this to force companies to curtail production (because right now, they are still producing even at lower prices so that they can get the cashflow to service their debt levels so that they don't break their debt covenants). Once production is curtailed, the supply overhand will work itself off and only then will there be a bullish sentiment for natural gas.

I'm a long term bull but short term bear.

Natural Gas: Worth Another Look

"When mentioning Iran... it was a small possibility that would cause the dollar to fall, thus increase the prices of commodities. "


nice! so you don't understand that the weakness in the dollar affects oil prices because the GLOBAL OIL MARKET trades in $/bbl, whereas the natural gas market is domestic and thus the dollar has very little (to none) impact on natural gas prices.

do us all a favor and don't write any more articles on natural gas. it will save you time and embarrassment.

Natural Gas: Worth Another Look

I might also add that "technical analysis" isn't the best tool for trading a commodity like natural gas.

You see, the 50 day and 200 day moving averages won't change or alter the 20 mmcf/d Haynesville wells that Exco, PetroHawk, etc. keep bringing online, flooding the market more and more every day as storage levels brim full.

I love all of these "UNG must be at a bottom!" articles and NONE of these authors adress the storage issues. Right now, there is more gas in storage in the "producing region" than at the peak of last year (2nd week in November before withdrawls started). And we still have 4 more months to go before withdrawls!!! You will start seeing PHYSICAL limitations on injection (read: you wont be able to inject and with no place for the gas to go, the price will be driven down at Henry hub).

Good luck catching this falling knife!