Natural gas is more expensive to store than oil.
The process involves liquefying the gas under extreme cold, if I remember right. It’s an intensive process, and has a higher maintenance upkeep cost than storing natural liquids unless I’m mistaken.
Natural gas spare storage space is in short supply.
Producers have no room to store the extra gas that is coming out of the ground. If they want to keep pumping, they need to clear out some cubic feet first.
Natural gas is a byproduct of drilling for oil.
It’s not like all gas producers can just shut down. Unless they want to let the gas escape into the atmosphere (not sure that’s legal, ethical, or profitable), or else shut down oil extraction, then gas is going to keep coming, whether there’s somewhere to put it or not.
These three things have kept me sidelined in face of the “cheapness” that is natural gas. While the value of gas, from the standpoint of using it for energy is without question undervalued, well….it can get a lot cheaper nonetheless.
From the point of view that is oil producers, it’s not a choice to shut down production. And if it’s between selling the gas they’re recovering from oil fields for mere pennies, or losing it altogether, they’ll liquidate those holdings for pennies.
My guess; right now speculators are holding too many short term futures betting on “the bottom,” to make buying financial plays on natural gas profitable, or even safe for that matter. I need to see gas spike lower as these lot get wiped out, before being willing to dip my toe in.
Because unless you’ve personally got an empty natural gas storage facility to back up your bet, and enough money to keep it running, the gas can and will keep flowing into markets for ever cheaper prices…
Since this winter, I’ve been thinking buying natural gas in the summer should be a good plan. Probably right in the middle of June or July. My reasoning was that the summer months will show just how backed up the natural gas infrustructure can get, and force the lowest prices on the part of producers. Then it’s smooth sailing to ride into the winter.
This all depends on forcasts for winter weather. If I’m seeing talk of another warm winter, I’m not touching natty on any future closer than 2 years. But I think a lot of this winter was caused by that once-a-decade phenomenon, El Nino or La Nina, or…whatever.
The point is: let the market collapse more, and let the Farmer’s Almanac be your guide. If this is the bottom, you won’t lose anything by not putting yourself on the line.
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You fail to take into account more utilities opting to use gas than coal, more infrastructure to move the gas and LNG facilities coming online in Canada and the U.S. to export it. Abroad we’re seeing more conversions from nuclear to gas by Japan & now Germany, creating an even bigger demand for cheaper North American gas via LNG.
maybe. But if the other factors are a concern, wouldn’t you be better off betting on the LNG exporters themselves and utilities gaining from lower priced gas?
ECA will be an exporter of LNG from Canada
Yes, you would be better off. Although I’d point out that if gas suppliers are at full capacity right now, they can’t really average down their cost of natty until they free up some space.
True, and I think natty will reap the benefits of that.
But the summer is naturally a bad time for natty. Even if it’s used more for electricity and gets a boost from a really hot summer with lots of AC demand, unless those facilities can fully switch in less than 3 months, you could still see a huge bleed out.
Better to nibble than bite here, in my opinion.
Good to know, but I have seen these exact same arguments against being long illegal immigrants.
Lol
The long term demand picture for NG always look favorable from a pricing standpoint. But I’ve tried to pick a bottom several times and failed every time. So for now I avoid it.
Eventually the bear market will end. Hopefully I wont liquidate my position out of boredom before then. FD: long $UNG, short various calls to fund the carry on the position.
You could probably hedge your position by going long some utilities that use natty, if you’re looking to protect the position until a visible bottom forms.
or use the fertilizer & steel stocks as a hedge … X recently announced converting to gas from coking coal to reduce costs and one could presume other steels will follow their lead. The fertz margins always explode when their main input source is available at bargain rates.
Staying long ECA (decent yld for LT Accts)
Cramer and T-Boone (ad infinitum, ad nauseum) “Natural Gas is the future if only the polititians would subsidize it”. In other words there is no market for it so we will force it upon you and use your tax money to make it “viable”.
But all I need to know is when I call up my driller and he says “struck gas again goddammit”, that’s not a good sign.
Away from the turret right now, but looking at CME website you can apparently go all the way out to Dec 2020 for $5.70?
If your summer bleed out thesis is correct, it might be worth just sitting on a few bids 5+ years out, hoping for a miracle fill.
Hard game to play. How low can it go? Read somewhere recently that natural gas prices in Alberta Canada once traded negative.
In fact…what you seem to know about investing in anything is alot!!!!
Once Again Mr. Thaler lays out his case and once again the opposite will make you money. As Cain was short oil he should have been short nat gaz. And as he was woefully wrong on oil he will be woefully wrong on advising all to stay away from going long nat gaz. 10 year low… universally hated… despised.. yes my friends,, this is when you go long. There may be some pain yet there is where the biggest gains are.
Are you a fucking psychopath? Hey load up into the summer months. Since you first said “Buy”…what was it, a month ago?…you’re already down a boatload. I’m sure 90 degree weather in July during zero disposable income growth will treat you good.
Oh and BTW Mr. Thaler, rather than “sell it for pennies” it is flared off, as it has been on the North Slope of Alaska since “73” as there is no way to transport it. It is currently being flared off all along the gathering system. What you don’t know about Nat Gaz is alot.
So wait, you are both trying to tell me that nat gas in some remote part of Alaska, a state no one gives a fuck about, is routinely lit on fire it is so worthless, and also that loading up on nat gas here is a brilliant investment.
Fuck off junior. Give me names of what you’re buying, and dates as you buy, or choke on a dick.
You cannot be “long natty” and free from the issues of storage cost, dwindling storage capacity, or not worried about what operations that recover natty as a secondary product are doing.
I don’t care about butt fucking Alaska. In places like the Dakotas, companies like APC or XOM are not going to stop pumping gas because of poor pricing. At the least, they just get rid of it, which will put a massive bid over the market until enough demand or capacity expansion creates room to store more.
Unless Jack Wadds owns a natural gas distribution center like PNY, he is not long natural gas and not worried about unutilized production. You do not just go long UNG and call it a day. That’s not how fucking options work.
I believe they (somebody) estimate 3% of all gas production is associated gas. Associated gas being the shit that comes out when you are producing oil.
If that’s true, it’s a measurable amount but not enough to collapse the entire industry. Yes, natty is sometimes flared off but the EPA has clamped down on that. Some places it’s illegal but I’m not sure what extent that’s been taken to.
Where’s the estimate from?
Yeah I figured with the EPA the flaring claim was just sort of nonsense. Not this administration.
I think I fucked that all up. That’s what I get for going from memory. After digging through some stuff the picture has changed.
Estimates are that 5% of natural gas production is flared off (http://tinyurl.com/3bof7e8). That’s where my memory failed me.
Looks like “associated gas” could be up there around 30% of total natural gas production (http://tinyurl.com/6oe9yjh) Ooops.
Regarding regulations on flaring, this has been on the table a lot longer than the Obama administration has been in office. Just skimming some google searches, I came across documents relating to this from back in the 1980’s. I think it really picked up steam around 2005 or so.
That sounds more reasonable. Natural gas is such a simple compound, anywhere you find abundant amounts of more complex hydrocarbons, you should always find it. Just seems to make sense.
I see stories from time to time about the rednecks in LA getting blown up by the gas stored in the salt domes underneath their trailer homes. I guess the real estate agent forgot to tell them about that feature.
Nibbling a little tvix today Cain? Foul mouthed lout
No, my embryonic stooge, I have enough, my last purchase having been made in the mid $6 range.
Have fun trying to rub it in. I am fully aware that if you are not paper trading, and actually betting on the price of natty, you have at least a 50% loss on your hands since you last came around here prattling.
Seeing how oil is only 33% higher than the bottom (and basically right where I started shorting it last summer), I’d say that makes me the winner.
More importantly, you can have as many 1% up days as you like. Be right 90% of the time. Come around and tell me about it. Act like a raging jackass.
Because in that two week time slot when you lose all your fucking money, I’m going to be up 60%, pissing in your face.
The oil and gas sector is pretty complex if you try looking at it as one industry, but if you separate it into segments it’s easier to make sense of the processes and operations involved. Upstream gas operations are not complex, but once gas has been scrubbed and is past the first compressor its all about infrastructure (including storage), and it’s a good idea to have a look at the different infrastructure components separately. If natty is a hit with customers then that’s great, but for the foreseeable future it’s infrastructure plays that will reflect that success. Haven’t seen a well researched case for higher natty prices, and most folks have correctly avoided the NYMEX “products”.
If memory serves me right, some weeks back, Chess and Wine had a look at UNG. But again, before getting involved in natty it’s worth getting a good understanding of the segment, and before betting on UNG it’s good to have a look at the underlying NYMEX contracts (UNG might have its day, but over time its the floor of NYMEX that soakes up the cash).
Sorry little wadd.. my Sbux 1K shares at 45 have more than offset my puny 3k minus in natty.. and it is not a loss as i am building a position for the future. Hey how’s the old Baltic Dry Index fuckwadd story workin out?
oh yeah… you pegged the euro to go to par as well.. Luv ya!
I’m going to assume you’re the same little faggot who was betting against me on the euro…
…at 1.4
and I am not a raging jackass… I enjoy your writing and give props when I choose.. but stop the “choke on dicks” juvenile chatter.. we save that for the FLY.
Good night Mr. Thaler
on a final note.. please indulge.. I can never lose all of my money. Now once again.. Good Evening.
My OCD makes me post in 3’s sorry