Tokyo based, expat Cape Bretoner. Learning to live in a de-leveraging world. Better suited to the crusades. CFA & FRM charter holder. Disclaimer: @Firehorsecaper reminds investors to always perform their own due diligence on any investment, and to consult their own financial adviser or representative when warranted. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.
Joined Jun 23, 2015
86 Blog Posts

NG – Your Balls May Not Fall Until April

Natural Gas is now trading at levels not seen since 2002. We stand today at $2.10 per MMBTU (one million British Thermal Units, aka BTUs). The January 2016 contract traded in the past week at all time contract lows. For reference, when Brian Hunter of Amaranth fame tried to divine a nat gas price spike over the Winter of 2006/2007, price were at $5.11 per MMBTU. A massive inventory build in the USA and unseasonably warm temperatures (New York enjoyed temps in the 70’s through much of November) have been given credit for the plunge. I officially call codswallop on this natural gas swoon.

New York is not Singapore.

Latitude (an internationally sanctioned measure of the distance from the equator):

Singapore 1.3 degrees N

Beijing 39.92 degrees N

New York 40.71 degrees N

Beijing just endured the coldest November it has experienced in 6 decades (not 6 year, or 16, 60 years). The Chinese government (smart lads, reference the IMF’s SDR announcement of yesterday) wants to promote the use of natural gas in China. Coal still makes up a full 40% of China’s energy needs (Mad Max poor air quality this week exasperated by El Nino, apparently). Airborne particulate from NG is 1/10 that of coal. China cut NG prices by 30% for non-resi customers as recently as October 2015 to spur demand which was running at a growth rate of 5%. China shortages of NG are now running at 40% versus ramped demand, due largely to the November cold snap. This market can turn quickly. January 2016, I see a 3 handle. JCG

Disclosure: Long NG

Note: BTU = heat required to heat 1 pint (16 oz.) of water by 1 degree Fahrenheit. 3,412 BTU = 1 kWh

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