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Portfolio Holdings



Thank you for your interest and support for Celsius Energy. This page displays my live oil & natural gas holdings. The portfolio primarily uses a high-risk, high-reward strategy utilizing leveraged ETFs to capitalize both on over- and under-valuations of each commodity versus their respective Fair Price as well as underlying defects in the ETFs themselves inherent in the leveraging process. The portfolio also often holds smaller stakes in oil & gas producers, midstream partners, exploration companies, and LNG & crude oil tanker companies to balance risk. The portfolio updates near real-time during market hours with new trades and quote data. A trading outlook and discussion is issued on Sunday afternoons and Wednesday mornings with a specific focus on my portfolio holdings and trading strategy for the current week.


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Mid-Week Trading Outlook & Discussion

Oil & Natural Gas Portfolio Falls From Near 52-Week High In Organized Pullback On Natural Gas Weakness; EIA Forecast To Announce Record-Setting -9.1 MMbbl Crude Oil Withdrawal In Today's Petroleum Report; Both Commodities Remain Undervalued


Wednesday, August 16, 2017
After once again approaching a yearly high last Friday, my Oil & Natural Gas Portfolio has embarked on an organized pullback the first two days of the trading week, dropping 1.4% including 0.5% on Tuesday, to reduce gains since May 1 to 11.4%. I made a single trade this week although my cash position remains robust.


As loath as I am to engage in technical analysis, it is worth noting that the 13% +level--representing a 52-week high for the portfolio--is acting as serious resistance with the portfolio approaching it on three separate occasions in July and August so far and each time pulling back. Nonetheless, I remain comfortable with my holdings and feel that it is likely, if not inevitable, that the portfolio will break this threshold in the near term.


As it has all summer, my largest position remains my natural gas long stake which stands at a net exposure of 21% after subtracting my long-term maintenance UGAZ short (9.5% of holdings) from my large DGAZ short (30.2% of holdings). I remain bullish on natural gas across all time frames due to the combination of a reasonably favorable temperature pattern through the remainder of August into September as well as ongoing market tightness (though not as tight as earlier this summer). My storage model continues to call for storage injections at or below the 5-year average each of the next 4 weeks with the model now projecting the long-standing natural gas storage surplus flipping to a deficit by the second week of September. Furthermore, thanks to weak imports from Canada and sustained LNG exports, the natural gas supply/demand balance remains sufficiently tight such that even a near average temperature pattern is likely to lead to a modestly bullish storage injection.


Following the two day pullback in natural gas prices in the wake of last week's 5-month best 7.5% weekly gain, my Fair Price Model continues to show a large undervaluation across all timeframes. Based on current inventories--and an estimated +52 BCF surplus versus the 5-year average as of this morning--the commodity is undervalued by 10.9%. This undervaluation grows to 12.3% by September 1, around the time I expect inventories to flip to a storage deficit versus the 5-year average, and is averaging 15.9% over the entire 8 month period for which projections are issued. While this is not a guarantee that prices will rise immediately--especially as investors seem to be waiting to see the impact of new gains in production and the arrival of flows on the new Rover Pipeline--I expect that it will limit further downside risk. Further, the longer that prices remain under $3.00/MMBTU this summer, the more competitive powerburn demand will be and the more likely that marginal temperature-independent gains in demand will drive the storage surplus to a deficit by September. For this reason, I am patient and have no problem with continued near-term weakness in the commodity and continue to view the trade from a long-term perspective. As I've mentioned before, even natural gas chopping around between $2.90/MMBTU and $3.00/MMBTU will benefit this position in the long-term due to leverage-induced decay. I am content with my position size and, provided that net long exposure remains under 30%, will not reduce exposure. Depending on how the rest of my portfolio is doing, I will consider covering a portion of my UGAZ maintenance short should natural gas prices drop under $2.90/MMBTU to boost long exposure.


My only trade so far this week was to once again add to my long oil position via shorting DWT when oil dropped under $48/barrel on Monday, boosting this position size to 9.5% of my portfolio as of Tuesday's close. This position is down 6.7% from my cost basis presently. Nonetheless, I remain bullish on the commodity, starting with today's data release. The EIA will release its weekly Petroleum Report for August 5-11 this morning at 10:30 AM EDT. The American Petroleum Institute (API) announced Tuesday afternoon that it was forecasting an exceptionally bullish -9.1 storage drawdown. Not only would this be over 5x the 5-year average -1.8 MMbbl draw, it would crush the previous largest withdrawal for the August 5-11 period in the full 33-year period for which EIA storage data is available, 2009's -5.3 MMbbl draw, by nearly 4 MMbbls. Should it verify, inventories would fall to 466.3 MMbbls, the lowest since January 22, 2016, 20 months ago, while the storage surplus versus the 5-year average would drop to +82.7 MMbbls, down more than 60 MMbbls from the record high of +148 MMbbls set just 4 months ago. Though unlikely, should inventories continue to contract at their current rate, the storage surplus versus the 5-year average could flip to a deficit as early as late February 2018, even as domestic production nears new all-time highs--remarkable.


According to my Fair Price model, investors continue to discount oil across all time frames. Based on current inventories alone, the commodity is trading at a 17% undervaluation versus its Fair Price of $57.59/barrel. While probably exaggerated as the current feverish pace of storage contraction will in all likelihood relent, the commodity is undervalued by a whopping 38% based on storage projections averaged over the next 8 months. For this reason, I remain bullish on oil long term and expect prices to reach $60/barrel by the end of 2016. Should the EIA report a drawdown anywhere near the API's forecast (and there be no large refined project injections), I will look to build my oil long stake via short DWT on any oil weakness to north of 10% and even approach 15%. One reason that I feel comfortable doing so is that my cash position stands at a very comfortable 46% of my holdings. My goals is to keep this position over 40% (although this is flexible) so I can commit 6% to the cause.


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.