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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (121127)	5/28/2009 8:54:51 PM
From: tradingfaster123	2 Recommendations Read Replies (2) \| Respond to of 206114

Ed, less bad is a huge step from where the market was during the winter. I mean it was literally 5bcfpd oversupplied, and thus couldn't even manage one withdrawal over 200bcf even with a few extremely cold weeks. This report we just had is typically the second highest build of the injection season (next week is typically the highest because of Memorial day), and given a weather-adjusted neutral number of 95 or so, we got 11 over or 1.5bcfpd. The last few weeks were similar, ranging from 0 to 1.5bcfpd or so. For the week we had, 106 just isn't that bad. But since we still are marginally oversupplied with risks of getting storage too full in the fall, I'm in your camp and don't see any big moves up (over $5) in the immediate future...until there is clear evidence the market is tightening too much (undersupplied or negative baseline numbers). But I am bullish on the second half of this year because I think that will happen sometime in the summer. If we put the current oversupply in context (1.5bcfpd), that is down significantly and extremely rapidly from the 5bcfpd of the winter. What caused this tightening is hard to say, but no doubt it was a combination of a lot of things. We know about canadian imports dropping like a rock, coal to gas switching, electricity generation demand losses narrowing... plus U.S. production probably already has started to drop. But that drop has a long way to go given that the rig count sill hasn't bottomed. Not to mention the fact that at this point, it looks like industrial/commercial/generation demand are more likely to go up than down. A 1.5bcfpd oversupply is a slim cushion to absorb the supply losses and demand gains that are to come sometime in the second half. Even the most conservative estimates have U.S. production falling 3bcfpd by year end, with some estimating 6bcfpd. And demand can easily go up 1bcfpd from here. Not to mention, the LNG imports we are getting now (1.5-2bcfpd) are going to drop to around 0.5bcfpd come winter. Given all that, there is no way around an undersupplied market versus the 5-year average from my viewpoint. This is all priced in to some extent with the 2010 natgas strip around the high $5's. Overall, it looks like we are in for a classic cyclical rebound in natgas and $6-8 sounds reasonable for the winter. This is a great time to be long the best natgas producers, imo. I think these have 50-100% upside. On a technical note, I would say the 5-year average for the last 10 weeks is +442, compared to the +334 you cited. Americanoilman.com, I think, is off. For example, next Thursday we will get a high build that included the Memorial day weekend. But americanoilman's comparable for 2008 is 87. But the comparable memorial day number for 2008 is actually 105. Re: the UNG, that thing is going crazy. 50 million shares traded today and the net assets are exploding. Clearly a lot of retail and institutional investors want to get in on a "cheap" commodity given what we all saw happen to oil. The net assets are up to 2.2 billion or thereabouts and getting close to surpassing the USO even. No doubt that had some influence on natgas again today. Natgas also bounced off what seems to be some decent support at $3.50. European prices are in a solid downtrend, however, and now frequently trading under $4 so that may be somewhat of a ceiling until we get more evidence of a tight market. I'm never going to underestimate these rallies in natgas though...we saw what happened last time.