Nat Gas decline nearly done

Only about 30 cents to go and Natural Gas reaches my $2.50 target.

But 30 cents doesn’t matter considering my original Short call on Natural Gas from its lofty $10 mark seen several months ago.

You can read the time series of this view in all of the links below, including some that discuss correlations to Australian inflation.

The focus now is to consider a Long position in Natural Gas…..or a 2nd or 3rd derivative of that idea.

January 26, 2023
by Rob Zdravevski
rob@karriasset.com.au

The energy dominos are falling one by one

Now that RBOB Gasoline, Natural Gas, Dutch TTF Gas and the JKM LNG Marker prices have halved, I think other commodities in the energy complex are at a critical juncture.

While I remain cautious and specifically bearish on crude oil prices (I expect WTI Crude to move towards $65-$68 from its current $84.50), the larger declines could be seen in Heating Oil and Diesel (Gasoil).

They are currently trading at $3.95 and $10.82 respectively.

Both Heating Oil and Gasoil remain in downtrends across various timeframes and now I am watching a few more indicators to confirm strength and the next leg downwards.

If so, there could be 40% further downside in Heating Oil and Gasoil.

This view all seems quite perverse as the Northern Hemisphere winter approaches.

p.s. the largest use of diesel is in transportation, not electricity generators

I’ll write when/if the probability of this increases.

October 25, 2022
by Rob Zdravevski
rob@karriasset.com.au

Energy stocks correlations

The next directional move in Woodside shares hinge on the direction in and or a combination of the Japan/Korea LNG Marker, the U.S. Natural Gas price, the West Texas Intermediate (WTI) Crude Oil prices along with the AUD/USD.

The charts below show the various correlations between Woodside shares and those assets.

My analysis of Woodside shares suggests that has a further 15% downside risk to $28, which is where I will be a buyer.

I may perform this exercise across other energy related equities.

JKM LNG Marker (in blue) versus Woodside

Henry Hub Natural Gas (in blue) versus Woodside

WTI Crude Oil (in blue) versus Woodside 

AUD/USD (in blue) versus Woodside 

October 19, 2022

by Rob Zdravevski

rob@karriasset.com.au

A bearish reversal day for energy

What a difference a day makes, although one day doesn’t make a trend.

Overnight WTI Crude, Brent Crude, Heating Oil, Gasoline all fell 2%. Natural Gas fell 10%.

What is more important is last night’s trading session produced a bearish outside reversal day in all of mentioned commodities. This is where prices traded outside the previous day’s range, meaning today’s high and low was higher and lower than yesterdays range and the closing price was below yesterdays. It’s a bit more bearish because today’s close was lower than yesterday’s intra-day low.

September 7, 2021

by Rob Zdravevski

rob@karriasset.com.au

Nat Gas may halve before it doubles again

Lately, I’ve been calling an interim top in Crude, highlighting extreme overboughts in Gasoline, Heating Oil and Distillates and a peak in the Australian Dollar.

Natural Gas has also touched some extreme overboughts where a Long trading exit target of $4.07 was hit.

Now, I think petroleum prices ease lower over the medium term while Natural Gas may nearly halve in price in the next 10 months or so.

Crude prices lead Natural Gas prices. Crude is down $12 since I made my recent ‘top’ call.

Below is picture of how I think it may play out.

You can see the resistance and supports it needs to test or break and this will help tell me if I’m wrong.

If the scenario below evolves, you’ll also see weaker (commodity) currencies such as the AUD and CAD while the U.S. Dollar strengthens.

August 9, 2021

by Rob Zdravevski

rob@karriasset.com.au

Take your pick – Thorium or Uranium

While I have hinted that I am bullish on nuclear energy and uranium……I have been an avid watcher of thorium which has been seen as a nascent alternative but in truth it has existed for some time. Its evolution has been retarded for a host of political and capitalist reasons.

An extract from this article says, “China has some of the world’s largest reserves of thorium, a silvery metal with weak radioactivity. By some calculations it has enough to meet the country’s energy needs for at least 20,000 years. By contrast, China has some of the lowest uranium reserves of any nuclear-capable country”.

https://www.neimagazine.com/news/newschina-moves-forward-with-thorium-molten-salt-reactor-8919220

Still looking for lower oil prices

Brent Crude has fallen 12% since my note (3 weeks ago) called a peak.

Last night’s 6% decline (to $68.75) suggests and adds a little more strength to the downward trend.

The two links below discuss my bias for lower prices.

For now the $62 mark is a spot to watch and certain technicals over the coming weeks will help me decide if a new Long position is established there or around the $57 level.

July 20, 2021

by Rob Zdravevski

rob@karriasset.com.au

Energy’s diminishing index weighting

“By the end of 1980, six out of the top ten companies by market capitalisation were energy related related as was one third of the S&P 500” – Goehring & Rozencwajg

40 years later that landscape is very different.

Today, the energy component of the S&P 500 is 2.8%. The lowest on record.

A Suez Crisis and higher Natural Gas

In Egypt….

two Presidents have been removed from power,
human rights are being violated,
christians are being suppressed and
people are being killed whilst protesting

What if the Muslim Brotherhood (an Iranian proxy) takes power in the world’s most populous Arab nation which borders Israel and straddles the Suez Canal?

Will this make the world nervous?

It’s possible that we see Western intervention to correct matters and protect their billions of dollars spent on military aid over the decades.

Oil prices will probably rise further but I’ll speculate that Natural Gas prices will rise more so.

The price of Natural Gas have been falling for years but I think this will reverse.

When oil becomes more expensive, I think demand for cheaper alternatives such as Natural Gas will be sought and oil won’t be the only fuel source that buyers will settle for.

Furthermore, I expect gas projects (including American shale) will not come on-stream as quickly as expected, due to the rising cost of capital and overall cost overruns.

It is rare that when a commodity is in high demand that it stays cheap for too long.

A freeze of a different kind

Over the weekend, the European Central Bank (ECB) decided to steal up to 40% of the bank deposits held in the Cypriot banks above EUR 100,000.

This will specifically affect a large amount of Russian owned deposits. Moreover, the Russian government was humiliated over the weekends decision for they were not consulted after having been courted earlier in the week.

Furthermore, when banks re-open, capital controls will most likely exist to prevent the free flow of money out of Cyprus.

I think Europe themselves needs to prepare for a different type of freeze.

Come this winter (December 2013-Feb 2014) I would expect Russia to re-coup some of “their” money by turning off the gas pipelines to Europe.

Energy prices will rise, utilities will be affected and the consumers pockets will be hit.

A population doesn’t like being hungry and especially freezing cold. Watch out for any growing social backlash against Europe’s politicians.

 

 

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