Natural Gas New Big Trend - Fundamental and Technical Report
Commodities / Natural Gas May 13, 2009 - 10:06 AM GMTBy: Submissions
Michal Matovcik writes: Ai note: earlier in the day we posted technical setup of natural gas and pointed out that this asset is technically extreme oversold and created rounded buttom. For more, in the last few day we saw the first bullish breakout through resistance. I think that now is the time to look also at fundamentals behind this commodity.
First few opinions: “People look at this market technically as being extremely oversold.” said Jarvis, who is based in Hampton Falls, New Hampshire. “Gas is pretty washed out on the downside.” “We had one of the most violent moves ever for natural gas. On a technical standpoint you’re looking at a market that has gone through a vicious down cycle. Once people put their foot down on the buy side it will move aggressively higher.”
WSJ:
“Pickens Plan” logo. He told a packed auditorium that the U.S. is importing two-thirds of its oil even as the country is “absolutely overwhelmed with natural gas.” If the reverse were true, he said, he would favor burning oil.
Some environmentalists have embraced Mr. Pickens’s plan as a way to fight climate change. Carl Pope, executive director of the Sierra Club, says he sees natural gas as a “bridge fuel” that could help the U.S. burn less coal and oil until renewable sources of energy are ready to take over.
The dual message of energy security and environmental responsibility has helped Mr. Pickens win powerful allies, including Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and dozens of elected officials from both parties. A bipartisan bill providing tax incentives for natural-gas cars looks likely to pass this year.
Note: Pickens - billionare investor, Mr. Pickens has spent millions promoting an energy plan that aims to, among other things, convert thousands of big-rig trucks to run on natural gas. Mr. Pickens has large investments in natural gas and stands to benefit if his plan is adopted. In TV ads, Internet videos and speeches, he emphasizes a different goal: reducing U.S. dependence on foreign oil.
Ai note: now back to facts
- The U.S. rotary rig count was down 17 at 928 for the week of May 8, 2009 and is 49.7 percent lower than last year.
- The number of rotary rigs drilling for oil was down 6 at 190. There are 171 fewer rigs targeting oil than last year. Rigs currently drilling for oil represent 20.5% percent of total drilling activity.
- Rigs directed toward natural gas were down 11 at 730. The number of rigs currently drilling for gas is 745 less than last year’s level of 1,475.
- Year-over-year oil exploration in the US is down 47.4 percent. Gas exploration is down 50.5 percent.
- Theresa Gusman, head of equity research for Deutsche Bank AG’s (DB) DB Advisors unit, told Bloomberg that spending on U.S. exploration and production will drop an estimated 40% to $22.5 billion this year.
- To produce the same amount of energy, burning gas emits about half as much carbon dioxide as burning coal.
- Of the 372 power plants expected to be built in the U.S. over the next three years, 206 will be fired by gas and just 31 by coal, according to the Energy Information Administration.
- With so many rigs coming offline, fourth-quarter gas production could decrease by 5.2%, Bloomberg reported. That would outpace the relatively acute decline in natural gas demand forecast by the Energy Department.
Ai note: and now very interesting and promising longterm chart of US active rigs count
Ai note: wordlwide rigs count
Ai note: in april The Wall Street Journal reported that years of higher natural gas prices this decade has spurred more drilling and innovation, resulting in a production rise of 11% over the past two years in natural gas. But this is only one side of equation and doesn’t represent longterm trend. As you can see above low prices are now causing producers to scale back their efforts to bring new demand online. $3.50 mark for natural gas is widely regarded at the “shut in” price - the point at which drillers are better off going home than drilling for more gas. From my point of view more exploration projects will be shelved, and more rigs idled, as economic turbulence continues to linger. The cost of drilling and servicing is double what it was just four years ago, and since that time credit standards have tightened and the cost of borrowing money has increased substantially. My bet is that Risk/Reward in this commodity is far better than in other market segments, more when we are on multiyear lows. Everything could go lower, but you have to see the potential compared to risk. Good luck
Michal Matovcik
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