-->

Portfolio Holdings



Jump To: | Intraday Portfolio Data | Investing Commentary | Holdings By Position & Sector | Daily Portfolio Performance | Last 10 Trades |



Monday Investing Commentary


Near-Term Fundamentals Remain Favorable, But Natural Gas Is Priced For Perfection & May Be Poised For A Pull-Back; Crude Oil Domestic Fundamentals To Take A Backseat This Week As Overseas Geopolitics Dominate


Monday, June 18, 2018
Natural gas rallied 6 cents or 1.9% on Friday to settle at $3.02/MMBTU, up 4.6% on the week. It was the highest close for the commodity since January 31, 2018. The natural gas rally was driven by expectations of continued warmer-than-average temperatures that will maintain the storage deficit versus the 5-year average above -500 BCF heading into July. Additionally, unexpected supply disruptions have kept production growth in check and below 80 BCF/day, contrary to earlier analyst forecasts that called for continued growth throughout the summer. As the Figure to the right shows, natural gas prices are now 4.5% higher than year-ago levels following a nearly 25% discount heading into May, which could have consequences for fuel-switching the rest of the summer. WTI crude oil, on the other hand, tumbled by $1.83 or 2.7% to $65.07/barrel on Friday, down 1% on the week. The drop came despite a generally favorable Wednesday EIA Petroleum Status Report as expectations of an OPEC production hike...

Continue Reading Full Article...


Holdings By Sector
Holdings By Position




Portfolio Performance


2018 To-Date Performance


Trading History



Monday Investing Commentary

Near-Term Fundamentals Remain Favorable, But Natural Gas Is Priced For Perfection & May Be Poised For A Pull-Back; Crude Oil Domestic Fundamentals To Take A Backseat This Week As Overseas Geopolitics Dominate


6:00 AM EDT, Monday, June 18, 2018
Natural gas rallied 6 cents or 1.9% on Friday to settle at $3.02/MMBTU, up 4.6% on the week. It was the highest close for the commodity since January 31, 2018. The natural gas rally was driven by expectations of continued warmer-than-average temperatures that will maintain the storage deficit versus the 5-year average above -500 BCF heading into July. Additionally, unexpected supply disruptions have kept production growth in check and below 80 BCF/day, contrary to earlier analyst forecasts that called for continued growth throughout the summer.

Natural Gas Front-Month Price Versus 2017

Figure 1: Click here for more information on on natural gas pricing data.

As the Figure to the right shows, natural gas prices are now 4.5% higher than year-ago levels following a nearly 25% discount heading into May, which could have consequences for fuel-switching the rest of the summer. WTI crude oil, on the other hand, tumbled by $1.83 or 2.7% to $65.07/barrel on Friday, down 1% on the week. The drop came despite a generally favorable Wednesday EIA Petroleum Status Report as expectations of an OPEC production hike weighed on sentiment throughout the week. The Brent-WTI spread finally began to narrow as Brent suffered a steeper 4% weekly loss to $73.44/barrel, driving the spread down to $8.38/barrel, down from nearly $11/barrel the previous week. My Oil & Natural Gas Portfolio dipped slightly on Friday but still finished the week up +1.1% despite my not making a single trade. The portfolio is within 0.2% of all-time highs, up +14.5% through the first 115 trading days of 2018, +31.7% annualized. In the week ahead, I will look to take profits on my natural gas net long position as the commodity approaches my target price and flip back to net short as I feel that investors are over-relying on temperature trends to support demand. I will also consider taking profits on my Brent short position and/or adding to my WTI long on a further dip in prices.


With last week's rally, my net natural gas long position has contracted down to just 2.1% of my holdings. My DGAZ short position--providing long exposure--stands at 13.6% of my holdings and is up +23.0% from my basis while my offsetting UGAZ short position is worth 11.5% and is up +10.3% from my basis. Regarding the near-term outlook for natural gas demand, powerburn should remain robust through the remainder of June as most computer models continue to show above-average warmth dominating the Midwest and Eastern Seaboard for at least the next 2 weeks. This should drive storage injections at or below the 5-year average with inventories finishing June at more than 500 BCF below the 5-year average. It is likely that this June will be the warmest since 2000.

Temperature-Independent Natural Gas Supply/Demand Balance Versus 2017

Figure 2: Click here for more information on on natural gas supply/demand balance.

This is allowing weather-driven demand to continue to mask underlying weakness in fundamental supply/demand balance. As the Figure to the right shows, even with stalled production and declines in Canadian imports, temperature-independent supply/demand balance is still 6.3 BCF/day looser versus 2017. With rising LNG export demand and above-average warmth driving powerburn 4-6 BCF/day higher year-over-year, overall temperature-dependent demand has been able to overcome this looseness and maintain the storage deficit. However, if and when temperatures moderate and production resumes its upward climb, it is likely that inventories will see consistently above-average storage injections as this looseness once again manifests itself. This looseness will be further exacerbated by rising prices which, as shown in Figure 1, are now priced at a premium to year-ago levels which will likely suppress fuel-switching from coal and other fuels to natural gas. Long-term, I expect this will be a case of too-little-too-late as inventories are guaranteed to be well-below the 5-year average by the end of the Autumn shoulder season. However, investors seem to be pricing natural gas assuming that this artificial weather-driven tightness will continue indefinitely and I would not be surprised to see prices pull back, perhaps sharply, when demand subsides.


For this reason, I plan to take profits on my long position as prices approach $3.10/MMBTU and will probably transition back to a net short position betting on a near-term pullback. With my cash position holding at a comfortable 30%, I will probably do this in a cash-neutral fashion, covering around a 5% portion of my DGAZ short and transferring these funds directly to UGAZ to develop around an 8%-10% net short natural gas stake. For those unable to short these ETFs, because I expect this to be a relatively short-term trade, going long UGAZ is a viable strategy as I don't expect to be holding long enough for leverage-induced losses to become a significant problem. Alternatively, selling short three times the volume of the 1X ETF UNG, which almost always has shares available at a good rate, is reasonable. I will look to add to this position on further strength up to around $3.20/MMBTU to build a total net short position of around 15% of my holdings. My near-term downside price target is $2.80/MMBTU.


Regarding crude oil, I will be very cautious this week despite increasingly attractive prices as I expect that price action will be driven by overseas geopolitics rather than domestic fundamentals ahead of OPEC's June 22 get together in which the organization is widely expected to raise output. My Brent-WTI arbitrage trade finally began paying dividends last week as the spread contracted and these gains helped to mitigate losses from my net long WTI trade via short DWT which, after removing the portion of this holding responsible for offsetting my Brent BNO short, stands at around 6% of my holdings. Should the Brent-WTI spread fall under $6/barrel, I will likely begin to unwind this pair trade. And I will only consider adding to my WTI long trade via DWT should that commodity fall all the way to $60/barrel. While painful near-term, long-term this sell-off is likely good news for the DWT short as the rising volatility and steeper moves is likely to support leverage-induced losses.


Disclaimer: Current Portfolio Holdings are released by Celsius Energy as experimental products. While they are intended to provide accurate, up-to-date data, they should not be used as trading recommendations nor should they be used alone in making investment decisions, or decisions of any kind. Celsius Energy does not make an express or implied warranty of any kind regarding the data information including, without limitation, any warranty of merchantability or fitness for a particular purpose or use. Investing Commentaries represent personal opinions and analysis and should not be taken as investing advice.