I've been watching the divergence between NG and CL grow for months. With the recent run up in CL and collapse in NG I decided it was time to get involved. Speaking of UNG, the contango on NG is a problem, but then again with the contango on CL, my short will mean that at least I am getting some of that back.
Goldman Sachs bullish on nat gas out this afternoon: The current low NYMEX natural gas prices are already triggering a series of reactions that should tighten the supply-demand balance NYMEX natural gas prices have declined meaningfully over the past few weeks, as an early end to winter temperatures has been reflected in high inventory numbers and an earlier- than-normal start to the summer injection season in the United States (see Exhibits 1 and 2). However, we believe that the decline has taken NYMEX natural gas prices to a level that motivates a substantial tightening of the supply-demand balance. NYMEX natural gas prices have fallen substantially below NYMEX Appalachian coal prices, which have remained stable over the past month (see Exhibit 1). This has re-established the economic incentive for coal-to-gas substitution in US power generation. NYMEX natural gas prices have also fallen substantially below UK NBP natural gas prices (see Exhibit 1), reducing the economic incentive to send LNG cargoes to the United States. We also believe that the decline in NYMEX natural gas prices will motivate high- cost US natural gas producers to curtail production. It has recently been reported that the US Department of Energy (DOE) production data has not accurately captured this response, and that it is currently overestimating US domestic production. With the introduction of the revised EIA-914 survey, we expect a more accurate picture of the response of high-cost US domestic production to lower prices to emerge. Read more: http://www.businessinsider.com/even...es-are-unsustainably-low-2010-4#ixzz0kYTbkZAF
"Goldman Sachs seems to think they're calling the bottom and that prices for natural gas can only be headed up." Well since GS never lies or misleads anybody then they must be right.
GS Bullish? Uh oh... gonna use this opportunity to sell some calls over the weekend.. just 1:1 with my long positions...
Producers have been slamming the back cals for weeks. And We're getting a huge build next Thurs. I'm a buyer of puts before EIA next wk.
I know it's ATF, but I'll post what i'm up to anyways... 3/25 - Long 2 NGK0 @ 4.02 3/25 - Long 2 NGN0 @ 4.22 4/9 - Short 2 NGK0 440 Calls @ 6.2 avg. 4/9 - Short 2 NGN0 460 Calls at 21.5 avg. 4/27 - NGK0 440 calls expired (+12.4) 4/27 - Cover long 2 NGK0 @ 4.225 (+41.0) Currently Long 2 NGN0 (last 4.12) @ 4.22 (-20) Short 2 NGN0 460 Calls (last 12.5) (+18) I might be bailing this spread tomorrow based on today's action....though we did caress that trendline so well...
IMO it's not cheap enough yet. It's in a bear market and not yet at extreme value (e.g. 2, 2.50). The NG/CL ratio is not yet quite big enough IMO, we've seen 30:1, 40:1 before.
The chart is like a gift right now. Range traders gotta love it. Breakout traders sitting patiently on their hands. Something for everyone! The question is, is it forming a base or just consolidating for the next down move? I'll wait for the range to break.