Friday, September 7, 2012

Natural Gas Prices Tumble

Following up on yesterday's "EIA: Weekly Natural Gas Storage Report-Injections of 28 Bcf (short it)" and
"Kase and Co. Comments on Natural Gas":
The front futures are trading at $2.844, up 4.9 cents.

I believe the analyst in the post below is too bullish for any but the shortest time periods. Despite what the E&P companies were announcing last spring, production has declined, at best, by 1/2% and if demand falls off at all, the difference will balloon into an excess of 7-10 Bcf/day....
The futures reversed yesterday, closing down after getting up a nickle and this morning are following through to the downside, $2.70 last down 7.6 cents.

So what's going on? As we said on August 30:
October futures are up .008 at $2.693. Speculators appear to be focusing on the mini-heat-wave expected over the next few days.
They should probably focus on the production side rather than consumption....
Production, production, production.

And to top it all off we're hearing there are over 2000 wells that have been drilled and are awaiting completion. Norway's Statoil alone has 400 awaiting hookup in the Marcellus so the 2K number may be on the low side.

Here's the two week chart via FinViz, note the spike and collapse yesterday:

The last time we saw that pattern the futures dropped from $2.93 to $2.58.
Thirty-five cents may not sound like much but on your initial margin it's a 117% profit or loss.
In 20 days.

This stuff can kill you.