Monday, January 16, 2012

New UNG Low: Nobody Wants Natural Gas

Wow, for whoever shorted UNG:

"Gas Bears Boost Bets on ‘Catastrophic’" Bloomberg
According to Bloomie, hedge funds turned bearish on U.S. natural gas for the first time in eight weeks, blaming a big surplus and warmer-than-normal weather, which pushed the price to the lowest level in more than two years. Not to mention a new all-time low in the infamous UNG.

"The funds and other large speculators switched from bets that futures will rise to a bearish, or “short,” position of a net 10,344 futures equivalents in the week ended Jan. 10, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Jan. 13".
“The funds that got short are feeling good right now,” Kyle Cooper, director of research for IAF Advisors in Houston, “As long as it stays this warm, prices have to go lower. With this type of weather, the storage surplus becomes catastrophic.”

"Seasonal Record Storage slipped 95 billion cubic feet in the week ended Jan. 6, compared with a five-year average decline of 128 billion, the Energy Department reported. Inventories rose to an all-time high of 3.852 trillion cubic feet on Nov. 18".

"Supplies may reach a seasonal record of 2.4 trillion cubic feet in March, which is when heating demand usually ends and producers begin piping more gas into storage, Cooper said. Unless production falls or cold weather bolsters demand, prices will drop to $2.40 per million Btu, and perhaps below $2, as gas overflows storage caverns and clogs pipelines, he said".

“This is a situation that has never been seen before,” “If we hit 2.4 trillion, you’re looking at storage capacity constraints by July or August where you literally have system problems because the system is so full.”

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