Natural gas trade gone wrong… WSJ

by Jim Colburn • Friday, August 18, 2017

Liz Hoffman at the Wall Street Journal does a nice job getting into some details of a natural gas trade gone bad here

“Goldman wagered that gas prices in the Marcellus Shale in Ohio and Pennsylvania would rise with the construction of new pipelines to carry gas out of the region, said people familiar with the matter. Instead, prices there fell sharply in May and June as a key pipeline ran into problems.”

“Goldman’s key miscalculation last quarter was betting that natural-gas prices in the Marcellus Shale would rise relative to the national benchmark price in Louisiana known as the Henry Hub, the people familiar with the matter said.”

Here is the price chart:

“Goldman was in part likely catering to gas producers in the region that wanted to lock in steadier revenue through swaps and other contracts. Many Marcellus drillers reported big gains in the value of their derivatives portfolios in the second quarter—meaning their trading partners lost money in that period, at least on paper.”

Actually, trading partners probably didn’t make enough on the hedge to offset losses on the derivatives… A typical position for the dealer would be long Marcellus (buying from producers), short Henry Hub, which from the chart is a loser…

Natural gas spreads have been notoriously volatile over the years… March/April natural gas is known as the widow maker as it has ruined many traders over the years… The Marcellus/Henry Hub spread will be an interesting chart to watch as we get into the winter…

 

 

 

 

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Prices should be higher… Amrita Sen via The WSJ

by Jim Colburn • Friday, August 18, 2017

One of the top oil analysts in the world is quoted in today’s WSJ here

“”Prices should be $10 higher given where the fundamentals are,” said Amrita Sen, chief oil analyst at Energy Aspects, an energy market research consultancy.”

“But Ms. Sen said prices were being held back by investor concern over still-rising U.S production. She said the market was overly focused on the EIA’s concurrent announcement that U.S. output had increased by 79,000 barrels a day, to 9.502 million barrels a day, during the week ended Aug. 11.

“The market is so obsessed with supply. If U.S. output is going up and stocks are drawing that is an extremely bullish development,” Ms. Sen added, noting rising demand.”

 

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World PMI’s indicate expansion…

by Jim Colburn • Thursday, August 17, 2017

World Purchasing Managers Index are in expansion mode… Check out Dr. Ed Yardeni’s world PMI charts here:

http://www.yardeni.com/pub/ecoindglpmi.pdf

 

 

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Crude oil implied volatility update…

by Jim Colburn • Thursday, August 17, 2017

August 16th implied vol for crude oil settled at 27.5, basis October, the second nearby option month… Here is a long term chart of implied vol based on at the money, second nearby options, including August 17:

The long term average since crude oil options began trading on the exchange is around 33%…

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Don’t sneak up on a wheat trader…

by Jim Colburn • Thursday, August 17, 2017

They’re probably a bit on edge these days:

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Some random charts from The Daily Shot…

by Jim Colburn • Thursday, August 17, 2017

The Wall Street Journal’s The Daily Shot contains many interesting charts… I pulled out a few:

The US is probably far to the left on this chart…

There must be some experts somewhere with an opinion and a price target on Bitcoin…

The Mexican Peso is doing well going into NAFTA negotiations…

 

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Stock levels, days supply… EIA

by Jim Colburn • Thursday, August 17, 2017

From the EIA’s This Week in Petroleum, here are oil and products stocks in perspective… First, stock levels compared to 5 year highs and lows:

Crude oil is making significant progress, while gasoline looks like a typical seasonal draw remaining close to 5 year highs… and distillates are still close to 5 year highs… “Days supply” compares stock levels to current demand… I have argued that even if stocks remain elevated, increased demand could result in an effective tightening of supplies (and, perhaps, moving prices up to the $50 area)…

Distillate and crude oil look better compared to last year, gasoline is about unchanged…

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Smaller Price Discounts in Appalachian Region, Natural Gas… EIA

by Jim Colburn • Wednesday, August 16, 2017

In the EIA’s Today in Energy:

“As new pipeline projects and expansions are completed, the difference between the Henry Hub national benchmark price and daily spot natural gas prices at pricing hubs in the Appalachian region has narrowed. Through the first seven months of 2017, the difference between prices at the Henry Hub in Louisiana and at Dominion South in southwestern Pennsylvania averaged $0.53 per million British thermal units (MMBtu), about two-thirds the average difference of $0.76/MMBtu during the first seven months of 2016. The differences between the Henry Hub and other Appalachian region price points followed similar trends.”

This is a most amazing chart of natural gas production in the Appalachian region:

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OECD Stocks Below Last Year, OPEC Compliance Weakens… IEA

by Jim Colburn • Sunday, August 13, 2017

From the IEA’s Oil Market Report released on Friday:

…”new data suggests that in 2Q17 global stocks fell by 0.5 mb/d and preliminary data for July, particularly in the United States where stocks fell by 790 kb/d, is supportive. Even so, we must not forget that they are falling from a very great height in volume terms. At the end of 2Q17, OECD commercial stocks, which are the component of the global total for which we have the most visibility, stood at 3 021 million barrels, still more than 219 mb above the five-year average although they have now fallen below 2016 levels.”

“The compliance rate with OPEC’s output cut fell again in July to a new low of 75% from June’s revised figure of 77%. For those non-OPEC countries acting in support, their compliance rate in July was 67%. ”

 

 

 

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Strong domestic and export demand is outpacing U.S. gasoline production, resulting in stock draws…EIA

by Jim Colburn • Sunday, August 13, 2017

From the EIA’s This Week in Petroleum, here are some charts which show the gasoline production in 2017 compared to the 5 year average…

and, inventories, exports and product supplied (implied demand):

 

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