Tuesday, September 15, 2009

Natural Gas Up Again; "Schork: 'It's a Bubble"'

The futures were recently up another $0.185 (5.61%) at $3.482. From FT Alphaville:

There were some very volatile moves higher in Nymex natural gas futures on Monday.For those who might be interpreting those swings as the makings of a genuine bull market, we thought we’d present some of Tuesday’s commentary on the subject.

First, our favourite, which comes from Stephen Schork of the Schork Report (our emphasis):

What we are seeing here is a technical bubble. For example, the underlying to the NYMEX contract at the Henry Hub lost 11 cents yesterday, while Transco Z6 inched up a penny to 3.16. Go that? NYMEX Henry Hub gas futures closed at 3.297 yesterday afternoon, while the physical gas for delivery into New York City traded around 14 cents lower yesterday morning. NYMEX gas is a bubble… but be careful, Lord Keynes has a point.

He added:

We stand by our words and our numbers. No doubt, gas is cheap. But, if there is no value, than cheap, in and of itself, is not a reason to own something. Back in the 1980s the Yugo GV was cheap also. The car was cheap for a reason. Its Soviet-bloc engineering (see today’s G.M.) exuded the feeling it was assembled at gunpoint1. Gas today is cheap for a reason.

There is too damn much of it. Over the weekend Alan Lammey at Natural Gas Week noted that ANR Storage was reported as 97.4% full, Sonat Storage was 97.3% full. Meanwhile, Texas Gas Storage was 96% full, Transco Storage was 83.3% full and Tennessee was estimated at 89% full… and it is only the middle of September for crying out loud.

Olivier Jakob at Petromatrix, meanwhile, once again reminded to what degree the UNG rollover will be playing havoc with the price...MORE