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What is Up with Natural Gas? |
HenryTo
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 Posted: Tue Dec 26, 2006 11:00 am Post subject: What is Up with Natural Gas? |
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Since our December 17th commentary was published ("What is Up with Natural Gas?"), natural gas prices (basis the January 2007 contract) are already down by more than $1/MMBtu.
The contract is way oversold but a solid bottom is still nowhere in sight. For now, I prefer to sit and wait on the sidelines before buying anything natural-gas related (regulated pipelines notwithstanding). Watch out for Canadian producers especially since I believe the Canadian dollar is still way overvalued.
Best,
Henry
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What is Up with Natural Gas? Replies |
rffrydr
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Location: Sunny California
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rffrydr
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Joined: 30 Oct 2005
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Location: Sunny California
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| Posted: Wed Oct 14, 2009 8:25 am Post subject: |
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7 degrees in New York.
Here's some comment on the British scene:
| Quote: |
We are bearish on UK wholesale gas and power
prices. Lower demand, with little sign of any recovery,
means UK gas and power markets are heavily
oversupplied. The change in supply-demand balance is
stark, and the system operator’s (National Grid) latest
view on expected demand growth is very bearish.
Contango collapse? Given the deterioration in the
supply-demand balance over the next 12-24 months, the
current forward curves – steep contango – appear
optimistic. The risk is of a contango collapse, putting
pressure on wholesale gas and power prices for
2010-13. This is bearish for all generators (especially
DRX and IP) and for gas producers (CNA).
NH: Supply margins must be reasonable: We do not
believe that “super-normal” supply margins are
sustainable. Political and regulatory pressure will remain
high through the winter and is unlikely to ease in the
run-up to a UK election next year. We think investors
may be disappointed by EPS momentum at CNA.
Gas and power network regulation is pragmatic and
allows decent returns – NG and SSE the best plays.
NG is our top pick for its US upside, which could provide
material EPS surprise. We also like SSE for its balanced
business mix and scope to surprise to the upside, even
in a low commodity environment. We upgrade Centrica
to Equal-weight, but remain cautious on EPS
momentum here.
NH: We downgrade DRX and IP to Equal-weight. DRX
looks particularly exposed to weaker gas and power
prices. IP has risk in all its merchant markets. We think
the chance of positive earnings surprises is low. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Sat Oct 10, 2009 12:50 am Post subject: |
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US natural gas rig count climbs for the 11th week out of the last 12 weeks, but is still 53% below its all-time high rig count:
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U.S. natural gas rig count climbs 14 to 726
Fri Oct 9, 2009 1:20pm EDT
NEW YORK, Oct 9 (Reuters) - The number of rigs drilling for natural gas in the United States climbed by 14 this week to 726, according to a report on Friday by oil services firm Baker Hughes in Houston.
The U.S. natural gas drilling rig count has gained in 11 of the last 12 weeks but is still down sharply since peaking above 1,600 in September last year, standing at 822 rigs, or 53 percent, below the same week last year.
During the week ended July 17, 2009, the natural gas rig count slipped to 665, its lowest level since May 3, 2002, when there were 640 gas rigs operating.
Tighter access to credit and a 70 percent slide in natural gas prices over the past 15 months to below $4 per mmBtu forced many producers to scale back gas drilling operations.
The steep declines in drilling this year have started to slow production and tighten supplies, but most traders agreed it has not been enough yet to offset record high inventories and steep recession-related cuts in demand, particularly from the industrial sector. |
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HenryTo
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HenryTo
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Joined: 06 Aug 2004
Posts: 11261
Location: Los Angeles, California
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| Posted: Thu Oct 08, 2009 8:56 am Post subject: |
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Latest weekly natural gas storage report. Estimates of injections were all over the place this morning. Today's number was towards the high end:
http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html
| Quote: | | Working gas in storage was 3,658 Bcf as of Friday, October 2, 2009, according to EIA estimates. This represents a net increase of 69 Bcf from the previous week. Stocks were 473 Bcf higher than last year at this time and 480 Bcf above the 5-year average of 3,178 Bcf. In the East Region, stocks were 138 Bcf above the 5-year average following net injections of 37 Bcf. Stocks in the Producing Region were 272 Bcf above the 5-year average of 897 Bcf after a net injection of 24 Bcf. Stocks in the West Region were 70 Bcf above the 5-year average after a net addition of 8 Bcf. At 3,658 Bcf, total working gas is above the 5-year historical range. |
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rffrydr
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Location: Sunny California
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| Posted: Sun Oct 04, 2009 8:51 am Post subject: |
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FT Special Report on Gas
http://www.ft.com/reports/gas-industry-2009
I'm "selling" any weather market or capacity expansion or M&A. I'm buying the long-ago Greenspan predicted utility buildout--wind and solar will get the headlines.
Electrification? BYD is already priced for this and if their scooters are any indication.... I'm looking on the lowside of 10-15% of the retail fleet by 2020 with the real kicker not coming until (Big If, Go Honda) hydrogen rollout. Gasoline as diesel in "eco-boost" configurations (http://findarticles.com/p/articles/mi_m3012/is_12_184/ai_n8640951/) will be the "transition" tech. Like yuan appreciation the bullishness is robust and will last a long long time. All sorts of battery tech will be deployed in unexpected ways but Bolivia is never going to be the "new" Saudi Arabia.
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HenryTo
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Location: Los Angeles, California
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| Posted: Sat Oct 03, 2009 3:41 pm Post subject: |
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| I remember the talk about the potential for Rockies gas to supply the country a few years ago - i.e. before the discovery of shale gas in the NE and the emergence of horizontal drilling. Rockies gas is still significant, but this pipeline isn't going to earn the premium that it could've a few years ago. What it (and the rest of the natural gas industry) needs now is a significant build-up of natural gas fired plants and an immense electricification of our transportation system. |
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rffrydr
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HenryTo
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Location: Los Angeles, California
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| Posted: Sat Oct 03, 2009 10:15 am Post subject: |
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Another potential reason why November gas rose yesterday:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0EwsQG1hlW4
| Quote: | Oct. 2 (Bloomberg) -- U.S. Natural Gas Fund, the largest exchange-traded fund in the fuel, issued 7 million new shares today, the first new units for the ETF since July because of regulatory efforts to limit market speculation.
The new shares, worth $79 million, are backed by a total return swap with an investment grade counterparty, the fund said on its Web site. The Alameda, California-based ETF, known as UNG, has said it would offer new shares starting Sept. 28 to purchasers who bought creation baskets of 100,000 units, which are then sold on the open market.
“UNG continues to work to re-balance the existing portfolio of natural gas exposure by using a range of suitable investments including listed futures contracts, listed cleared swaps, as well as over the counter total return swaps,” John Hyland, the fund’s chief investment officer, said in an e-mail. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Sat Oct 03, 2009 9:59 am Post subject: |
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Henry Hub natural gas cash spread to prompt-month futures from January 2006 to yesterday (note that we are now at the peak of the current spike):
http://graphics.thomsonreuters.com/109/US_GASSPREAD1009.gif
Also note that (not shown) the spread between the November and December NYMEX futures is also to an all-time high. We should see some major convergence between cash and November over the next few weeks (technically, "cash" for October 2nd means physical deliveries over the next three days, or from October 3rd to 5th):
http://intelligencepress.com/features/intcx/gas/
I continue to believe that UNG will lose 30% to 40% over the next four weeks. |
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rffrydr
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HenryTo
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Location: Los Angeles, California
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| Posted: Fri Oct 02, 2009 11:31 am Post subject: |
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| Henry Hub natural gas cash price closed down to $2.30/MMBtu today. The spread between the cash and the prompt (November) price is now at an unprecedented $2.35 - and with four weeks of injections still to go! This will motivate producers to stuff as much inventory as possible into storage - leading to higher inventories (and thus lower natural gas prices) over the next few weeks. |
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HenryTo
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Posts: 11261
Location: Los Angeles, California
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| Posted: Thu Oct 01, 2009 8:37 am Post subject: |
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Latest EIA natural gas storage report:
http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html
| Quote: | | Working gas in storage was 3,589 Bcf as of Friday, September 25, 2009, according to EIA estimates. This represents a net increase of 64 Bcf from the previous week. Stocks were 491 Bcf higher than last year at this time and 481 Bcf above the 5-year average of 3,108 Bcf. In the East Region, stocks were 144 Bcf above the 5-year average following net injections of 38 Bcf. Stocks in the Producing Region were 266 Bcf above the 5-year average of 879 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 71 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,589 Bcf, total working gas is above the 5-year historical range. |
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HenryTo
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Posts: 11261
Location: Los Angeles, California
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| Posted: Thu Oct 01, 2009 8:20 am Post subject: |
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| Spot nat gas prices crashed to $2.80 this morning. |
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HenryTo
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Posts: 11261
Location: Los Angeles, California
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| Posted: Wed Sep 30, 2009 7:59 am Post subject: |
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| Spot gas down another 16 cents this morning - now trading at $3.20/MMBtu. |
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