Looks like you're 3 pennies in the black this morning... What made you think spreads would widen? mild October? Harsh November? Just shitty prices in general as injection season ends and everyone's already loaded up on cheap gas? Just trying to learn...
Oct/Nov crosses seasons, (injection in Oct/withdrawal in Nov), and is more volatile than a intra-seasonal spread. The seasons are Injection wich is April through Oct, and withdrawal which is Nov through March. You will notice that one of the most historically volatile spreads is the March/April. If there is any chance of supplies running too low by winters end, you could see a massive price response in March as it would be the month that storage could run out. With our over-supply, we may run out of actual storgae space before we get into withdrawal season, which would crater prices. I actually think this is a very real scenario and therefore Oct could fall ubruptly relative to Nov as excess cash has nowhere to go. The only way of possibly avoiding this scenario is to take prices down alot, and do it now, so we price enough production off and attract enough coal to gas switching to avoid this.
Papa, What is believed to be the storage capacity in the U.S.? It seems I have heard about 3.4 TCF. I know this changes because new storage capacity is added each year, and it can also increase if they increase storage pressure. TIA.
Since we have never even been close to testing it, it is currently believed to be at 4 to 4.1 TCF of actual operational capacity. So there is no absolute right answer yet, just a good guess. When we finally get through this pain in the coming few months, there will be another bull market. I read just today from an analyst ,(a very good one), that they have modeled production losses by year end between 4-8 bcf/day depending on the different scenarios. BUt don't get bulled up just yet, we still have to try to price out a glut in the coming few months.
I have added my second of three tranches of the +N/-Q at .165. Next tranche will be targeting .185 if we get there.
How do you follow coal prices? What are the rules of thumb for coal versus NG for fuel switching for generation? Any comments, general or detailed, on this top would be appreciated.