SHORT NG
As we are nearing the termination of trading date for the July contract, I have decided to enter the NG trade @ 6.10 USD during the European session with a short postion that I will maintain via a 3 X leveraged ETF over the next 48 hours if my stop loss @ 6.30 USD is not triggered and with the expectation of either reaching the price target 5.60 USD which is close to the 200 DAY MA on the 1 Year chart and -10% below the Dynamic Circuit Breaker Reference Price of 6.22 USD on 27/06/2022 but above the phsycological level of 6.50 USD. My expectation is a profit of atleast 24% or loss of 10% in this scenario.
There is still a clear division between "firm" markets (Asia) and "flexible" markets (Atlantic Basin - the U.S. and, to a lesser extent, Europe) for natural gas, though increasing interactions between these markets is enhancing globalisation of the commodity. This can especially be seen over the past few days where the price of NG is muted during the Asian trading session (which have more long term supply contracts) and more dynamic during the European and American trading session.
According to the SHORT-TERM ENERGY OUTLOOK on 07/06/2022 Henry Hub spot price to average $8.69 per million British thermal units (MMBtu) in 3Q22, this info seems outdated because on 08/06/2022, a fire at Freeport LNG‘s natural gas liquefaction plant on the Gulf Coast in South Texas led to the full shutdown of the facility. The shutdown of Freeport LNG will reduce total U.S. liquefied natural gas (LNG) export capacity by approximately 2 billion cubic feet per day (Bcf/d), or 17% of total U.S. LNG export capacity.
https://www.eia.gov/todayinenergy/detail.php?id=52859
Looking at the EIA STEO the cooling degree days are projected to decrease from July 2022 which also means a decrease in the demand for NG the Weekly Natural Gas Storage Report are already showing a net increase in NG. At the same time as domestic gas supply is increasing, the U.S. is the "market of last resort" for LNG. We may even expierence the following In the summer, when natural gas demand is low, there is a "demand push" where excess gas is delivered to the U.S., usually at low prices and slackening of demand due to the economic crisis only accelerates this push.
Fed Chairman Jerome Powell said last Wednesday that the central bank is “strongly committed” to bringing down inflation and since energy is a major component of inflation and oil is a major component of energy we can expect Natural Gas to decrease thanks to the asymmetric pass-through effect.
The only major upside risks seems to be Atlantic Huriccane risks especially in the Northern Gulf of Mexico with a Formation chance through 48 hours...low...10 percent for now.
There is still a clear division between "firm" markets (Asia) and "flexible" markets (Atlantic Basin - the U.S. and, to a lesser extent, Europe) for natural gas, though increasing interactions between these markets is enhancing globalisation of the commodity. This can especially be seen over the past few days where the price of NG is muted during the Asian trading session (which have more long term supply contracts) and more dynamic during the European and American trading session.
According to the SHORT-TERM ENERGY OUTLOOK on 07/06/2022 Henry Hub spot price to average $8.69 per million British thermal units (MMBtu) in 3Q22, this info seems outdated because on 08/06/2022, a fire at Freeport LNG‘s natural gas liquefaction plant on the Gulf Coast in South Texas led to the full shutdown of the facility. The shutdown of Freeport LNG will reduce total U.S. liquefied natural gas (LNG) export capacity by approximately 2 billion cubic feet per day (Bcf/d), or 17% of total U.S. LNG export capacity.
https://www.eia.gov/todayinenergy/detail.php?id=52859
Looking at the EIA STEO the cooling degree days are projected to decrease from July 2022 which also means a decrease in the demand for NG the Weekly Natural Gas Storage Report are already showing a net increase in NG. At the same time as domestic gas supply is increasing, the U.S. is the "market of last resort" for LNG. We may even expierence the following In the summer, when natural gas demand is low, there is a "demand push" where excess gas is delivered to the U.S., usually at low prices and slackening of demand due to the economic crisis only accelerates this push.
Fed Chairman Jerome Powell said last Wednesday that the central bank is “strongly committed” to bringing down inflation and since energy is a major component of inflation and oil is a major component of energy we can expect Natural Gas to decrease thanks to the asymmetric pass-through effect.
The only major upside risks seems to be Atlantic Huriccane risks especially in the Northern Gulf of Mexico with a Formation chance through 48 hours...low...10 percent for now.
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