Good Call so far papa on the H/J spread. I enter (short) the spread -U/+V in Crude Oil at -$1,74 I will keep that spread open until next friday because Im trying to profit from the USO rollover. Shorts: -U/+V at $1,74 -WTI/+Brent at -$3,20 Long: RBOB Crack at +$14.00 Have fun on your vacation pal!.
I decide to close the position today. the action wasn't strong enough in this USO roll. -U/+V: -2,12 -WTI/+Brent: -3,10 +RbobCrack: 14,88
who's been keeping an eye on oct/nov? this thing does nothing but sell off 24 hours a day! is this mostly due to the huge 'recovery' everyone on cnbc is talking about for q4? or is someone expecting a rediculously cold winter as compared to this extremely mild summer we've had?
Not just the V/X, all these nearby contracts have been getting crushed relative to anything deferred. Id love to hear why they've sold off so much more this time as opposed to other recent sell-offs in the Nat gas. Any ideas?
I couldn't believe how big the October to November contango is when I pulled up the November contract today. I thought I had pulled up Nov 2010 and had to double check! Nov is at 4.61 and Oct is at 3.75. No wonder we have record amounts of NG in storage -- you can make 23% per month (less carrying costs). How does one play a demand for NG storage? There's got to be great demand for more and more storage with this contango. Aaron Schindler Schindler Trading
Ah, here, I'll answer my own question... There are three types of Nat Gas storage owners: Interstate Pipeline Companies Interstate pipeline companies rely heavily on underground storage to perform load balancing and system supply management on their long-haul transmission lines. FERC regulations though demand that these companies open up the remainder of their capacity not used for that purpose to third parties. Twenty-five interstate companies currently operate 172 underground natural gas storage facilities. In 2005, their facilities accounted for about 43 percent of overall storage deliverability and 55 percent of working gas capacity in the US. These operators include the Columbia Gas Transmission Company, Dominion Gas Transmission Company, The National Fuel Gas Supply Company, Natural Gas Pipeline of America, Texas Gas Transmission Company, Southern Star Central Pipeline Company, TransCanada Corporation. Intrastate Pipeline Companies and Local Distribution Companies Intrastate pipeline companies use storage facilities for operational balancing and system supply as well as to meet the energy demand of end-use customers. LDCs generally use gas from storage to serve customers directly. This group operates 148 underground storage sites and account for 40 percent of overall storage deliverability and 32 percent of working gas capacity in the US. These operators include Consumers Energy Company and the Northern Illinois Gas Company (NICOR), in the US and Enbridge and Union Gas in Canada. Independent Storage Service Providers The deregulation activity in the underground gas storage arena has attracted independent storage service providers to develop storage facilities. The capacity made available would then be leased to third-party customers such as marketers and electricity generators. It is expected that in the future, this group would take more market share, as more deregulation takes place. Currently in the US, this group accounts for 18 percent of overall storage deliverability and 13 percent of working gas capacity in the US. Some of the companies mentioned are publicly traded, some are not. Spectra Energy (owner of Union Gas) and Enbridge look like promising investments. Aaron Schindler Schindler Trading
JPope - Great question. Bottom line is fundamentals far too bearish (as indicated by strenthening contango) and nat gas is not viewed as inflation hedge like crude oil - another market with bearish supply and demand (again, strong contango).
Yea, havn't the fundamentals been bearish all summer though? Also, why would crude be an inflationary hedge and not NG? Great thread...
Yes, market has had bearish fundamentals going back as far as 2006. This summer, occasional rallies sparked by spec short-covering leading to fast selloffs once those orders are exhausted. Nat gas not viewed as a key commodity when it comes to inflation like crude oil or gold. As for those two, crude oil has actually shown a stronger negative correlation to US dollar index than gold in 2009. It will be interesting to see how long that can last if the dollar breaks support and crude contango continues to strengthen.