If you're bullish on Oil... you should be bullish on Gas

[drbubb]

If you're bullish on Oil... you should be bullish on Gas

Natural Gas could be set for big moves up

= = = = =

 

I like the chart, showing the ratio of Natgas-to-Crude

 

 

It looks like, we have seen a nice bounce of the lows, and a correction.

And the ratio may now be set for a thrust up.

 

Back when I ran the Energy Derivatives team at a big global bank, I used to write market

comments for our clients. They were popular, and clients that followed my suggestions regularly

made money. One of the things I noticed in those days, was the tendency of energy markets to

alternate between Good years, and Bad years. The last good year for Natgas was two years ago.

There's no guarantee we will see a big up year for Natgas in 2007/8 winter. But the market was

prepared and hedged for a jump last year, and they did not see it. They are less prepared this

year, so if we get a cold winter, the market may really fly.

 

A rally back to the "pinch point" at 0.12 or the Upper Bolly at 0.14 would not be a big surprise.

That may look like much, but it is big percentage-wise, and would really "light a fire" in the Natgas sector.

 

Here's a link to the Natgas chart : Natgas

 

I am looking for good trading ideas amongst the Natgas stocks. Any suggestions?

[drbubb]

Threat:

"Storage for Natural Gas are at record levels of 3,425 BCF (early Nov.)

 

That's 9%, or 291 BCF, ahead of the 5 year average, and

nearly 100 BCF ahead of last year." - source: US Global report

 

(Question: how much has overall demand risen in 5 years, and even one year,

as a result of the big jump in Oil

 

So it seems the market IS rather well-prepared for a Cold winter,

(but maybe less so, psychologically)

 

Ed Young on TFNN spoke about how the natgas co's were al trying hard to sell

"price protection" to their clients. They are complacent because of the high storage.

 

So this factor needs watching.

 

= =

 

I will supply some links for collecting & montoring this information

[Walktothewater]

Threat:

"Storage for Natural Gas are at record levels of 3,425 BCF (early Nov.)

 

That's 9%, or 291 BCF, ahead of the 5 year average, and

nearly 100 BCF ahead of last year." - source: US Global report

 

(Question: how much has overall demand risen in 5 years, and even one year,

as a result of the big jump in Oil

 

So it seems the market IS rather well-prepared for a Cold winter,

(but maybe less so, psychologically)

 

Ed Young on TFNN spoke about how the natgas co's were al trying hard to sell

"price protection" to their clients. They are complacent because of the high storage.

 

So this factor needs watching.

 

= =

 

I will supply some links for collecting & montoring this information

 

 

 

PennWest is my perennial fav (PWT.UN - TSX)

 

Cons: Chart doesnt look great (to my eye), uncertainty over the trust tax situ in Alberta, recent takeover and digestion of another co. (Canetic)

 

Pros: Large cap, established producer, pays 14.5% div, run by dull conservative honest types, was touted back in summer by Zapata George(?) on Frizzers show

 

 

Also Unbridled (UNE.V) is another one Im watching, though missed the early Sept low (damn)

[drbubb]

(a throwaway comment from Russ Winter):

 

"Among the commodities that have been exploding lately is natural gas which has popped out of a saucer base. Break that resistance overhead like so many goosed commodities have of late, and it’s blue sky ahead. And just in time for a new round of price increases for Joe Ultra Light Sixpack (JULS) this winter. Price increases are coming fast and furious now. In thinking about strategies to play this market, unless one can spot a commodity where speculators are not heavily long like natural gas, it seems to me that going long the general crack up boom is a very high risk proposition"

 

/see: http://wallstreetexaminer.com/blogs/winter/?p=1199

[drbubb]

Independent Natural Gas and Oil - Large Cap

CNOOC Limited (34%)CEOH188.80149 28,180 108.00- 1.75

ncana CorporationECAB71.73 756 54,200 72.00 0.19 1.00

Canadian Natural ResourcesCNQ81.28 539 43,800 87.00 0.23 0.95

Occidental Petroleum Corp.OXYB70.74 837 59,200 77.00 0.07 0.92

XTO Energy Inc.XTOB66.46 391 25,970 75.00 0.17 0.91

EOG ResourcesEOGB87.00 247 21,500 102.000.06 0.86

Anadarko Petroleum Corp.APCB57.83 467 27,000 74.00 0.35 0.86

Devon Energy CorporationDVNB92.41 450 41,600 129.000.14 0.76

Total or Median301,000 0.16 0.92

 

Independent Natural Gas and Oil - Small Cap

Berry Petroleum CompanyBRYB46.25 45 2,080 44.00 0.23 1.04

Encore Acquisition CompanyEACB35.76 54 1,940 54.00 0.32 0.77

Energy Partners Ltd.EPLB14.85 35 510 38.00 0.31 0.58

Cimarex Energy CompanyXECB39.90 85 3,380 76.00 0.09 0.57

Total or Median7,900 0.27 0.67

 

Income

Kinder Morgan Energy Partners, L.P.KMPS51.95 178 9,260 17.00 0.54 1.94

Kinder Morgan Management, LLCKMRS50.28 63 3,170 17.00 0.54 1.90

Pengrowth Energy TrustPGH18.97 246 4,670 17.00 0.29 1.08

Canadian Oil Sands TrustCOSWFB39.00 479 18,680 39.00 0.07 1.00

Penn West Energy TrustPWEB31.59 242 7,630 34.00 0.22 0.94

Enerplus Resources FundERF48.65 128 6,230 52.00 0.13 0.94

San Juan Basin Royalty TrustSJTB37.73 47 1,760 40.00 - 0.94

Hugoton Royalty TrustHGTB25.06 40 1,000 34.00 - 0.74

Total or Median52,400 0.18 0.97 B =

 

/more: http://www.mcdep.com/mr71106.pdf and: http://www.mcdep.com

[dom]

Check out the COT. Says it all.

['Green'Investor]

Time to resurrect this thread?

 

Bill Powers (great name for an energy guy) said on financial sense on the weekend that he thinks Nat Gas could be "the big story for the rest of this year".

 

Plus a breakout seems to be happening a la Mark Shipman

[Maximilian]

3/16/08

 

Yes, it would be great to get some discussion on Nat Gas. The fact is, some big insiders are buying BIG stakes in their own companies. I think most of us have seen what Chesapeak's CEO has done! The "smart money" I've talked to are such cheerleaders fro Nat Gas. They act like it's going to $50 / mmbtu (up from today's $9.90 or so).

 

Here's what's on my mind:

 

1) Agricultural angle- Jim Rogers is all over agriculture, and has been for some time. He believes, whole heartedly, that we're only at the beginning of a 20 year commodity bull. He feels like ag. is going to be in shortage for a long time to come. If this is the case, fertilizer prices (nitrogen, phosphate and potash) are not bubbles. Now, nitrogen is the main cost input in fertilizer, especially nitrogen. If this is all correct, what a tailwind for nat gas.

2) Power generation angle- coal is abundant (250 billion tons remaining in the US; and, we consume about 900 billion tons annually right now....that's 250 year

remaining at present consumption). Most coal goes to fire power plants. Knowing that nuclear plants won't/can't come on line for many, many, many years, and that solar and wind combinded won't hardly make a dent, even in 10 more years, this seems a good bet that fossil fuels will still be converted to

electricity in the coming years. The question is, how much of this will be natural gas? If the price of nat gas goes up, does this tend to self-limit the demand for itself??

3) Macro Economic Angle- If the US goes into a deeper than expected recession, the decreased demand for heat may have an effect on nat gas demand.

Could this be a headwind to price increases?

 

Those are the issues running through my mind. What do you think? Is Natural Gas in a bull market for 2008 and beyond? Or, do the fundamentals dictate the same old trading range?

 

Max

 

[Gatesy]

I'm interested in gas. I've heard gas tipped on 2 or 3 occasions for the reasons Max outlines here in the last 3 months.

 

Moneyweek thinks gas looks good too. P11 from last weeks issue (14/3/08) makes the case. They don't seem to have a html link up yet to that article but if you are a subscriber then you've probably already seen it, if not take a look. I'll try to post a link when they put one up.

 

They make a strong case for increasing demand related to America's forecast energy growth, with particular reference to NG's green credentials compared with coal and the financing risks now being associated with coal power stations by the likes of JPMorgan and Morgan Stanley (ie. from increasing taxation burden related to carbon emmissions).

 

In terms of targeting future prices they quote Chris Mayer from Rude Awakeing who says "Old salts of the energy markets steer by the lights of a 6 to 1 ratio oil/gas"

 

This would seem to indicate a potential $17.5 MBTU (the 6 to 1 ratio being 0.16 on Dr Bubbs inverse ratio from the first post)

 

Perhaps you could give us an update Dr Bubb based on your experience as an "old Salt"

[Maximilian]

3/16/08

 

Power generation angle- coal is abundant (250 billion tons remaining in the US; and, we consume about 900 billion tons annually right now....that's 250 year

remaining at present consumption).

 

Obviously, I meant to say we (US) consume 900 million tons annually and sport roughly 250 billion tons or recoverable coal.

[Maximilian]

With an 11% decline THIS WEEK, I see the silliness of betting against T. Boone Pickens! The guy's only lived this stuff for the past 60 years!

 

The long-term fundamentals look somewhat promising. T. Boone would (I think) agree. In the near term, the rout is still on!

 

[Gatesy]

TBoone Pickens on gas prospects

 

 

Boone Pickens’ Energy Forecast: Natural Gas is the Transportation Fuel

for Tomorrow

Natural Gas Services Provider NeoFirma Assists in the Asset Management

of this Premium Fossil Fuel

 

DALLAS--(BUSINESS WIRE)--Legendary oilman T. Boone Pickens weighed in

on the United States’ energy situation during a recent webcast hosted

in part by NeoFirma, the leader in well information management

services for the energy industry. Mr. Pickens also offered insight

into what the future of transportation fuel can and should be.

 

 

“The United States’ oil production peaked at 10 million barrels a day

during the 1970s,” says Pickens. “Today we’re producing half of that

with absolutely no hope of increasing production. Even if we opened up

the entire country and looked for it, it’s just not there.”

 

 

That statistic, coupled with the nearly six billion dollars being

spent each year to import oil, led Mr. Pickens to provide a grim

assessment of today’s economic situation. “This is the greatest

transfer of wealth from one area to another in the history of mankind,

and this country just can’t stand it. But there are ways to make a

dent in our dependence on foreign oil.”

 

 

He cites using our own country’s abundance of natural resources –

natural gas in particular – to reduce the import of foreign oil by as

much as 30 percent. Specifically, using natural gas as a

transportation fuel will not only decrease the country’s foreign

dependencies, but will also make great strides towards cleaning up the

environment.

 

 

“Natural gas is a cleaner fuel source and North America has an

abundance of supply to tap into,” says Pickens. “Just look at what’s

occurring with shale development throughout the country. It’s real and

it’s happening everywhere – from Northeast British Columbia to the

Barnett Shale in Texas; from the Appalachian Basin to the Fayetteville

Shale in Alabama. In today’s business and economic environment,

natural gas is much more exciting and promising than oil. It is the

premium fossil fuel.”

 

 

Mr. Pickens made these comments during his webcast interview with the

Southern Gas Association on March 28, 2008. To view the program in its

entirety, visit http://events.variview.net/clients/ctn/20080328. The

interview was co-sponsored by NeoFirma.

 

 

From prospecting and exploration through operations, NeoFirma provides

natural gas producers and service providers the ability to create

improved value through its web-based information services. NeoFirma’s

services create performance reports and graphs to manage every point

of the well’s life cycle – assisting clients in the business decision

process with the right information, at the right time, and at the

right place

 

 

 

[Gatesy]

Any ideas what's happening with NATGAS prices at the moment? Is this pullback to $12 a buying opportunity or a sign of a heavier correction to come???

['Green'Investor]

Any ideas what's happening with NATGAS prices at the moment? Is this pullback to $12 a buying opportunity or a sign of a heavier correction to come???

 

Guess it really depends on your time frame. From what I'm hearing and reading it may be an opportunity to buy (and continue buying all the way down this correction) if you have a 18 month to 2+ year outlook, if $200+ Oil is to be believed then wouldn't NatGas follow suit?

 

Shorter term, who knows?

[Gatesy]

Guess it really depends on your time frame. From what I'm hearing and reading it may be an opportunity to buy (and continue buying all the way down this correction) if you have a 18 month to 2+ year outlook, if $200+ Oil is to be believed then wouldn't NatGas follow suit?

 

Shorter term, who knows?

What are you reading GI?

['Green'Investor]

What are you reading GI?

 

http://tonto.eia.doe.gov/ftproot/features/reloilgaspri.pdf

 

 

http://www.rice.edu/energy/publications/do...nship-nov07.pdf

 

 

[Gatesy]

NATGAS now at $9.90.

 

Ratio high oil/natgas is 14 over the long term, which with Oil falling to a possible $110 should put a floor under the gas price of c.$7.85. IMO at that price gas would be a steal, but as GI says, you might have to wait 2 years before you see a significant return.

 

To be honesst, at $9.90 on a current ratio (v oil at $126) of 12.7 and a forward ratio (v oil at $110) of 11.1 I think it is a steal now, but with the added requirement to possibly margin $30k for the privilege.

[gwizzie]

Looking at these at the moment, are you exposed to the gas Gatsey?

 

ngsp.l

ngaf.l

ngas.l

[Gatesy]

Looking at these at the moment, are you exposed to the gas Gatsey?

 

ngsp.l

ngaf.l

ngas.l

I have some ETFS Energy which incorporates gas but a direct Future is making my mouth water at the moment, but at 10,000 mbtu per contract thats £5k loss/profit for every $ move in NG... just about finding the right entry (which i think is about now....)

[gwizzie]

Rush for Natural Gas Enriches Corner of the South

 

Nobody knows for certain how big an area the Haynesville Shale covers — no government entity has mapped it. But energy companies and experts say it is large, possibly the largest in the lower 48 states, with an estimated 250 trillion cubic feet of recoverable gas. (Last year, the United States consumed 23 trillion feet.) It is up to 13,000 feet underground, extending into East Texas. A few initial wells are already producing startling amounts of gas, and the country’s appetite for the stuff is only growing larger as petroleum becomes more expensive.

 

Am i reading this right, they have possibly discovered 10 years (at current consumption) supply?

Could this be why the price has plummeted?

 

 

[Gatesy]

Rush for Natural Gas Enriches Corner of the South

 

 

 

Am i reading this right, they have possibly discovered 10 years (at current consumption) supply?

Could this be why the price has plummeted?

 

I think Shale is relatively well known about, certainly Pickens keeps going on about it. I think in the final analysis there is lots of many commodities about over the longer term. People talk much of a mega cycle in commodities this time around yet I am more a believer in a 'normal' 14 year cycle or so. So we are 7 to 8 years in with 6 to 7 years left. During this time it still takes many years to mobilise infrastructure, knowledge and people in order to extract commodities as prices rise.

 

IMO the recent fall is a pullback on overbought signals.

[gwizzie]

I think by looking at the charts there a seasonal element involved too. I was just confused how severe this correction has been, but then looking at the corrections in 06 and 07 maybe its not too bad.

 

how do you think the proposed prices increases (uk) will effect the price?

 

Do you know of any good sites for further research, i'm looking for inventory and proven resources.

 

Gas still arouses me

 

 

[Gatesy]

I think by looking at the charts there a seasonal element involved too. I was just confused how severe this correction has been, but then looking at the corrections in 06 and 07 maybe its not too bad.

Agreed

 

how do you think the proposed prices increases (uk) will effect the price?

I think it;s the other way round, I think Centrica and co can see the writing on the wall and are therefore warning of consumer prices doubling over two years, driven by rising wholesale prices. Or did you mean something else?

 

 

Do you know of any good sites for further research, i'm looking for inventory and proven resources.

I need to do some more digging on that one.

[gwizzie]

I need to do some more digging on that one.

 

Well the two of us digging should uncover something

[gwizzie]

Just testing how the formatting turns out

 

 

**edit-to delete crap formatting