In the crisis times the market will move to the most unwanted direction by investors and traders. And the most unwanted direction is getting losses with any type of investment - because of inflation, unstable commodity market, and huge correction of the stock market.
Commodities are an ideal asset for day trading. They are constantly produced and constantly consumed. And any imbalance in their production or consumption (including warehouse shortages) is traders' premium
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if someone calls an asset a safe haven, it is definitely not.
A storm in a safe haven shouldn't occur due to a random tweeting of a bird
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Let's talk about natural gas. One of my favourite commodities to trade.
I've seen gluts not followed by shortages, but I've never seen a shortage not followed by a glut - said once Mister Nassim Taleb.
So what really happened to the natural gas prices after extreme rise in 2021 and 2022?
So what really happened to the natural gas prices after extreme rise in 2021 and 2022?
Trade Like You Mean It
I've seen gluts not followed by shortages, but I've never seen a shortage not followed by a glut - said once Mister Nassim Taleb. So what really happened to the natural gas prices after extreme rise in 2021 and 2022?
Here is a good article explaining the mechanics behind the natural gas production and exports from the US:
https://www.reuters.com/markets/commodities/why-us-natural-gas-output-keeps-rising-prices-sink-2023-04-03/
In summary, when the oil production increases, it leads to the increase of the gas production and it cannot be really managed separately. But the export capacity is an independent thing and the storage capacity is another limitation.
https://www.reuters.com/markets/commodities/why-us-natural-gas-output-keeps-rising-prices-sink-2023-04-03/
In summary, when the oil production increases, it leads to the increase of the gas production and it cannot be really managed separately. But the export capacity is an independent thing and the storage capacity is another limitation.
Reuters
Why U.S. natural gas output keeps rising as prices sink
U.S. natural gas prices last week plunged to a 30-month low, crossing below $2 per million British thermal units (mmBtu) for the second time this year, even as some producers have cut drilling to stave off further convulsions.
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Here is a good article explaining the mechanics behind the natural gas production and exports from the US: https://www.reuters.com/markets/commodities/why-us-natural-gas-output-keeps-rising-prices-sink-2023-04-03/ In summary, when the oil production increases…
Finally, we have this good thread https://twitter.com/SStapczynski/status/1751277708980650027
that explains few more things:
- Henry Hub Gas prices are actual only for the US market. Many gas suppliers worldwide prefer long-term contracts and some link the gas price to the oil.
- Green energy factor can make the situation with the export capacity even worse. The demand will heavily depend on the US domestic consumption. And the supply can't be fully managed without cutting oil production.
that explains few more things:
- Henry Hub Gas prices are actual only for the US market. Many gas suppliers worldwide prefer long-term contracts and some link the gas price to the oil.
- Green energy factor can make the situation with the export capacity even worse. The demand will heavily depend on the US domestic consumption. And the supply can't be fully managed without cutting oil production.
X (formerly Twitter)
Stephen Stapczynski (@SStapczynski) on X
THE US LNG MIRACLE 🇺🇸🚢
This is the story of how the US became the world's biggest exporter of liquefied natural gas in less than a decade, drastically rewriting global energy trade
Thread below 🧵👇
This is the story of how the US became the world's biggest exporter of liquefied natural gas in less than a decade, drastically rewriting global energy trade
Thread below 🧵👇
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Finally, we have this good thread https://twitter.com/SStapczynski/status/1751277708980650027 that explains few more things: - Henry Hub Gas prices are actual only for the US market. Many gas suppliers worldwide prefer long-term contracts and some link the…
What's the outcome:
- the longer US government wants to keep gasoline prices low, not to provoke further inflation, the longer domestic oil production will push the natural gas production.
- higher supply + limited storage + limited export capacities + limited demand = pressure on the market prices.
- we may even face a situation with a negative futures contract price similar that we saw with the WTI crude oil back in 2020
https://www.nytimes.com/2020/04/20/business/oil-prices.html
- the longer US government wants to keep gasoline prices low, not to provoke further inflation, the longer domestic oil production will push the natural gas production.
- higher supply + limited storage + limited export capacities + limited demand = pressure on the market prices.
- we may even face a situation with a negative futures contract price similar that we saw with the WTI crude oil back in 2020
https://www.nytimes.com/2020/04/20/business/oil-prices.html
Trade Like You Mean It
What's the outcome: - the longer US government wants to keep gasoline prices low, not to provoke further inflation, the longer domestic oil production will push the natural gas production. - higher supply + limited storage + limited export capacities + limited…
Doesn't sound obvious but an increasing oil demand will make the production grow and gas prices in the US fall.
Trade Like You Mean It
Doesn't sound obvious but an increasing oil demand will make the production grow and gas prices in the US fall.
But let's imagine an alternative scenario. A new financial crisis comes and hits the global demand for oil. Oil prices go down - > production shrinks. A chance for the natural gas? Not really. While the production from oil producers may decrease, the other players including storage owners will use their chances to fill the void. And the demand won't really grow.