Why are natural gas prices over $8 this morning ???

[dan_s]

This is a subset of The Big Paradigm Shift. If the U.S. natural gas storage facilities do not fill A LOT in May, we will probably see double digit ngas prices within three months.

Trading Economics:
"US natural gas futures extended gains to above $7.8 per million British thermal units, close to an over thirteen-year high of $8.197, amid concerns that an early start to the cooling season could boost demand in May.
Weekly natural gas inventory injections are usually highest when demand for heating/cooling is lowest, which is during Spring and Fall. However, late-season wintry weather in April caused the gap between current storage levels and the 5-year average to widen to roughly 17%, and forecasts of hot weather in May may crippled utilities’ efforts to increase stocks ahead of next winter.
At the same time, output continued to face volatility amid the ongoing maintenance season.
Elsewhere, efforts by the EU to wean off Russian supplies have been keeping American export facilities running at near full capacity."

Just remember that "I told you so" in my weekly podcasts that we may witness the Mother of All Bidding Wars between the utility companies that deliver ngas to your home and the LNG exporters that take our relatively cheap gas to Europe and Asia. I will admit that I did not expect the bidding war to get this intense in May.

[mikelp]

thanks Dan, you definitely gave us a heads up!

some 2x BULL leveraged ETFs in the sector:

BOIL 2x BULL natgas (2x UNG)
GUSH 2x BULL oil&gas E&P (2x XOP)

viewing XOP's holdings, the Sweet 16 and Dan's Small-caps approx 40% of it's holdings, along with 20% in refiners

[Fraser921]

might be double digits of 10 this month

8.11 at 10:15 am Unbelieveable!

[heshoos]

Dan, how does this impact the coal equities like BTU? Given that coal is a substitute of Ngas and both are record highs, not sure which one is relatively more expensive or cheap for a electricity generation.. and what would be a tipping point for electric companies to bring coal back into the production of electricity. thoughts?

[dan_s]

The market has changed:
> With coal at $325/ton, it will take natural gas over $8.00 to make fuel switching economic.
> Coal inventories in the U.S. are very low and utilities may not be able to get enough coal to make a switch.
> Utilities are under pressure to keep their carbon emissions low.

Without gas-to-coal switching this year for power generation + LNG exports staying at maximum capacity, there is NO WAY that utilities can build the amount of gas in storage to make it through a normal winter. BTW it looks like we are going to have back-to-back La Nina winter, which have produced some of the coldest U.S. winters on record.

The planets have aligned for a VERY GOOD year for our gassers.

WARNING: Day Traders are setting the gas price at the front of the strip. There is not a gas shortage today, so each weekly storage report will have a big impact on the front month NYMEX contract. The Bidding War has started, but it will get more SERIOUS in Q3.

[Fraser921]

If the weeklys storage reports continue to be weak, i see double digits by June/July