Whip Saw & Threading Needles!

All things energy point to crude (Brent or WTI).  Guessing direction in the short term, let alone longer term, delivers hefty doses of humility.

OPEC compliance has already reached and is anticipated to run past the 90th percentile (a record for the oligopoly). Crude runs higher!  Measured in light of US Rig counts’ rise to annual highs; now 705 bringing 162 more rigs than a year ago, Crude Oil (USO which is a lazy man’s measure or any barometer including futures) has lost its way. Crude plummets lower! Headlines and data releases including today’s massive builds underscore the perils for growing long positions.  Are traders on the wrong side?  Probably if they’re in the wrong markets.

I wrote earlier about a fundamental shift in the energy markets.  I focused initially on Nat Gas and then a specific equity that has reserved its move for a time still ahead.  Importantly Rig counts too have risen, domestic demand grows beyond weather dependency, and exports to a global market are bustling.  In contrast domestic production is lower today than it was a year ago (70.4 vs 72.9 Bcf/d).  Likewise gross gas storage is lower today in spite of warmer east coast weather (heating days are lower this year than last and the historical average); data from EIA and NOAA.

Buy Low, Sell High

There’s plenty more under the hood of opportunity.  Shortly, I plan to write on EQT Corporation, reserved production, and their exposure to the Appalachian Basin.  I think EQT may have managed the uncertainty and volatility correctly.