>>>Over the last 4 weeks we have injected stronger than the same weeks in 2003.<<<
I don't consider the current series of injections to be too bearish. The real test case was the '01 injection season (at least in my active investing experience). Unfortunately, this series has rolled off the five year historical reporting sites, but the raw data are available through DOE. The link to the DOE long term history site is below along with the injection for each week in the injection season and a few absolute storage level in parenthesis (I pulled these easily off of the Excel sheet and did the calculation from the absolute storage level). NG prices and the OSX collapsed in June/July due to the strong injections. As you can see, trouble for the bulls started on April 27th. The crash in the summer of '01 hit me by surprise and I left quite a bit of paper profits on the table after the happy hunting season of winter '00-'01. After that super cold winter, storage was very low (record low I think). A mild recession was underway, there had been elevated drilling levels, and the summer was quite cool. It was this collapse which taught to to reflexively short the patch in January '06 after we had the extreme (record?) event of a build. Up until that point, even the thought of shorting my beloved patch was anathema to me.
I am getting cautious. The patch has been due for a run, having been bottled up for 18 months. The broad market might be pulling it along, but that is also due for a correction. We might be experiencing the "pre hurricane"/shoulder season end May pop, coupled with the crude oil/gasoline spike I see a lot of heat out west - big gas fired electricity area. The water levels are very, very low in the West. They rely heavily on hydro. So there are reasons to be bullish and bearish. I don't think that the current injections are especially heavily weighted.
The dynamics of the economy have changed significantly since '01. Industrial NG demand is down, but residential has grown significantly. Certainly the electric demand has grown at or above the LT average .5% annually. It is clear that most generation additions have been NG fired. I suggest that the true demand is hidden by the lack of residential pull in the shoulders. After all, we had two draws last July/August - unheard of!!! They had to be residential demand. There are no doubt many more speculators in the market. If nothing else they ass volatility.
If the summer gets off to a truly cool start and the hurricane factor seems null, then I will be hedging off or taking something off the table. I currently have quite a few holdings rather deep in the money via covered calls, so the decision is somewhat out of my hands, and a pullback won't be too much of an issue for me - in a certain sense welcome - tax and LT cap gains.
FWIW: I have been running my AC in Washington, DC 24/7 for the last two weeks. The humidity here makes the heat an also ran.
tonto.eia.doe.gov
3
69
34
103 April 27 (1054)
107
103
110 May 18
87
103 June 1 (1457)
103
104
104 June 22 (1974)
99
107
101
77
68
75
46
85
74
76
97
91
93
68
73
70
32
32 (3132) |
