UK Stockmarket 2009 and beyond

StevieJ

tradetime wrote: »

If you look here you can see the contango you are up against, shows all the monthly contracts

Wow, Is it almost worth leaving that gas in ground for now, what are the implications from that contango?

tradetime

StevieJ wrote: »

Wow, Is it almost worth leaving that gas in ground for now, what are the implications from that contango?

Well for most ETF type funds, they trade the front month contract, since they can't take delivery they must roll the contract forward each month (sell the March, and buy the April etc) as they are monthly expiry. This will usually be done in either week two or week three. In the case of a contango the contract you are you are buying is more expensive than the contract you are selling.
So you might be selling March at $4.00 but having to buy April at $4.10, so you are losing 0.10 every rollover on a $4 contract, even if the price of NG is standing still, thus the fund is bleeding about 2.5% per month even NG price remains the same.

They will attempt to offset this to some degree since they don't pay full price for the contract, but only post margin, then the bulk of the money will be held in short dated treasuries which will yield a small amount of interest, but it's tiny compared to the bleed, might just cover the fund management fee

StevieJ

So a business that produces gas and also uses in production would be better off buying on the spot market and leaving their own gas in the ground (ignoring the practicalities)?

tradetime

The thing is Shale Gas costs much less to produce, something like $2.50 per mmbtu for the Haynesville or Maecellus Shale I think, compared to something like $3.50 or $4 upwards for other sources. That's one of the reasons the production hasn't been cut back much in Shale gas, there are other problems associated with the drilling rights, as in the companies have to use 'em or lose 'em and another problem associated with an open well having to be kept in production otherwise it causes some sort of problem from the extraction point of view. So all in all it looks like no let up for investors anytime soon

sabretoothtigger

The whole Gas thing is part of a much bigger deal going over years and maybe decades into the future so I would stress dont buy it just because its cheap. Even on the TA I think I'd rather leave it to the wheeler dealers to buy and sell intra day because the prospects are uncertain.

Investment prospects dont always show in the numbers or charts so I'd place that more human element above more precise calculations

Massive supply increases vs limited demand growth makes it very volatile I think and commoditys are like this, very risky stuff.
I much prefer buying a company and I'd hope they would manage this fine detail for me like a very specific fund manager

HOC deal some options but only as cashflow insurance, they are still net long silver and so I expect similar from overally focused companies. Depends if they are well managed, cantos has video interviews with various CEO on issues like this


Shell will be majority gas in a year or two and I presume their switch is related to this. To build gas power stations and other uses for this supply will take time so I'd rather just hold a behemoth company like that and try to follow their strategy

I heard recently BP may be doing similar but Shell will be the worlds number one gas producer I think



Anyway the techno babble behind this is Fracking http://www.earthworksaction.org/hydfracking.cfm

Hydraulic Fracturing greatly improves the yield from previously hard to extract but valuable reserves and extraction costs count for alot I think. I really dont think the world runs out of oil more likely the cost rises and becomes uncompetetive and so on (peak oil) .

[The link I give there is a protest group I think, recent advances come from an acidic development of fracking which is quite toxic and of course there is the water table to worry about, etc ]




This is part of this and its gigantic news that the USA now has these generational reserves, it should be on the news at ten but it'll take many years to exert an influence I guess

anyway thats the deal with low gas prices I think, its for good reasons and I'd stay away personally after previously doing badly on bigger picture type dynamics like this. ( short term price could go up , I hope you get lucky but be cautious on this one I think)

cloud_dog

My gas excursion was a small punt which looks like it will also be a short one (hey ho).

Shell is my one investment in to a major, primarilly got it for the 7% yeild (when I bought). Interesting that they are moving some of their operations more in to the gas arena.

If anyone knows of any gas/oil stocks where there primary exposure is to gas I would be interested.

Thansk

bobbyj_2

this TMC looks very interesting given the ever increasing recovery in the price of Nickel.
http://www.psqanalytics.com/ gave it a valuation of 91p but that was when Nickel was around $7.5 a lb and today we have Nickel at $10.3 a lb. TMC currently around 32p, looks a stonker of a recovery story. Going to pick up quite a few more of these this next few days and hopefully keep until around 150p - a large target but this is a small co and share in the past has leapt once buyers start returning.

tradetime

To build gas power stations and other uses for this supply will take time

You'd have to check this out before letting it influence an investment decision, but I'm pretty sure I read somewhere that converting existing coal fired power stations to gas is a "relatively" straightforward process, so not necessarily any need to take the time to build new stations. But I agree with all the other sentiment you express. I've seen a lot of people damaged over the last year trying to play cheap gas.
To some extent I blame guys like Jim Rogers, clever though I think he is, I have seen him tell people if they are not "stockpickers" then the best way to play commodities is through the futures, like people automatically understand all the dangers of investing in futures, or that there are none. I think I have demonstrated with NG that playing futures can be high risk.
As most of us know, it's all risk, but I would say if you are not a stock picker (I'm not) and futures are not a strength, then there is a way, an ETF based on a basket of companies FCG is a US version for NG exposure. It's run quite a lot, but with NG prices still very low, I think it's worth some attention.
All the Oil Majors are looking at the NG space, Exxon has been acquiring assets in that space, I think it will be a major energy source of the future, perhaps the "new oil"

Unlucky on the trade cloud, unless it turns, but we all have them regularly, I much prefer a quick blow out, than one that drops to somewhere just above the stop and then grinds sideways forever. If I'm to be proved wrong, I like it to happen quickly so I can move on

Not as pure a gas play as FCG, but OILS from ETFS is as close as I can find to a basket in that area with a London listing.


P.S. Beware if playing in the US today, Quad witching day, lot's of games and oddities can occur.

sabretoothtigger

Thats good news it can be converted easily. Natural Gas burns pretty cleanly so its a positive really. Still Ive not heard much on it and it'll take some time to pick up, maybe not years then



Spotted this chart on Fres, I'd not noticed weakness personally



[If this chart trend is significant then the resistance I would anticipate would be around 854 for today I think]



Cable retraced its breakout, positive from here? Ftse 100 just pushed past 5662 resistance (weak) I had drawn in so still very positive it seems

tradetime

Don't have any near term analysis on the FTSE, but my longer term inline with SPX expectations calls for 6200 - 6300 this year