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Goldman Goes Short Nat Gas

Tyler Durden's picture




 

Last week we had the advance stop order shake out warning courtesy of berserk inverted fractal HFT algos which were completely not accidental. Now we get the real thing. Just out from Goldman's Samantha Dart: "NYMEX natural gas prices have rallied 12% in the past three weeks, largely driven by strong cooling-related demand for natural gas on the back of significantly warmer-than-average temperatures, and exacerbated by the still high nuclear outages. However, these factors are transient in nature, and their support to generation demand for natural gas will likely diminish in the coming weeks as the weather normalizes and nuclear power plants come out of maintenance...However, even after taking these transient issues into account, the supply and demand balance for gas was surprisingly resilient in May, especially given the continued impressive gains in shale gas production. We believe the production growth has been largely accommodated by additional strength in generation demand resulting from a wide discount of US natural gas prices relative to coal generation costs, as well as by higher pipeline exports out of the United States. We view the current high prices as unsustainable. In addition to the transient nature of the demand support from weather and nuclear outages, we expect the underlying balance to soften in response to the higher  prices, as production growth is further incentivized and price-induced coal-to-gas substitution diminishes. Accordingly, we recommend going short the October 2011 NYMEX Natural Gas contract, at an initial price of $4.84/mmBtu." Translation: Goldman is now buying nat gas.


Goldman Nat Gas Short

 

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Sun, 06/12/2011 - 20:14 | 1363757 Ahmeexnal
Ahmeexnal's picture

Short GS!

Sun, 06/12/2011 - 20:27 | 1363774 sabra1
sabra1's picture

short weiners! after rehab, go long weiners!

Sun, 06/12/2011 - 21:23 | 1363833 mrgneiss
mrgneiss's picture

I think Goldman is becoming less and less relevant.....

Sun, 06/12/2011 - 21:45 | 1363854 Abiggs
Abiggs's picture

Goldman has never had "the" gas desk, neither in trading nor research.

They no longer even have a trade desk in Houston.

Sun, 06/12/2011 - 23:56 | 1364033 Careless Whisper
Careless Whisper's picture

Has anyone heard if Bernie Blankfein got served with any more subpoenas over the weekend?

 

Mon, 06/13/2011 - 05:33 | 1364232 mrgneiss
mrgneiss's picture

I meant across the board, not just nat gas........except maybe as a contrarian indicator........

Sun, 06/12/2011 - 23:31 | 1363997 rocker
rocker's picture

Who's the asshole who junked you. That is your best call to date.

Short GS.  YUP.    And stay short until they get on the 52 Week Low list.

Mon, 06/13/2011 - 00:30 | 1364079 lineskis
lineskis's picture

Blankfein did! :D

Sun, 06/12/2011 - 20:13 | 1363759 Shredd the FED
Shredd the FED's picture

+1  :D

Sun, 06/12/2011 - 20:22 | 1363764 flyr1710
flyr1710's picture

soon they'll be short crude again

Sun, 06/12/2011 - 20:26 | 1363766 topcallingtroll
topcallingtroll's picture

Another translation is that goldman insiders and select clients knew ahead of time when this report was going to be published and for several days they were getting positioned in advance of goldman talking their book.

Sun, 06/12/2011 - 20:23 | 1363767 Ahmeexnal
Ahmeexnal's picture

 

The suggestion by a U.S. congressman that Iraq repay the United States for the money it has spent in the country has stirred anger, with an Iraqi lawmaker ridiculing the idea as "stupid" and others saying Iraqis should be compensated for the hardships they've endured.

http://www.foxnews.com/politics/2011/06/12/iraqis-blast-us-congressmans-war-repayment-idea You can't make this shit up no matter how hard you try!
Sun, 06/12/2011 - 20:21 | 1363768 Reese Bobby
Reese Bobby's picture

...and plans to continue buying nat gas.

 

Goldman Sachs: "Stealing from our customers since 1869"

Sun, 06/12/2011 - 20:46 | 1363792 Irwin Fletcher
Irwin Fletcher's picture

All that theft is transient, I mean transitory.

Sun, 06/12/2011 - 20:27 | 1363770 ZeroPower
ZeroPower's picture

 Translation: Goldman is now buying nat gas.

Indeed, they very well could be. I commented on this in an earlier NG thread, but in short, due to the huge supply glut still outstanding, NG is a wonderful short at least the end of the summer.

After the summer, cyclically, NG might very probably start its next run up to the '08 highs. Absolutely no reason for $4.8 to be considered cheap for NG, this is simply due to the over capacity currently available.

Longer term, LONG AS FUCK ng futs.

Sun, 06/12/2011 - 21:36 | 1363848 Abiggs
Abiggs's picture

Even short term, "long as fuck ng futures" - resistance has been broken at $4.80 and if it passes $5, watch out because everyone will be rushing to cover their shorts.

So far this summer has been mirroring 08 and if that's any sign of things to come, then get ready for some volatility...

 

Sun, 06/12/2011 - 22:47 | 1363939 Rich_Lather
Rich_Lather's picture

much of the natgas build-out in the last few years has been financed in part by natural gas futures before natural gas went into a dive. Many of those futures are expiring this year.

I expect a small dip and a rip-roaring take-off.

 

Sun, 06/12/2011 - 20:35 | 1363779 kito
kito's picture

Goldman ball sachs analysts should be restricted from 1st amendment rights.

Sun, 06/12/2011 - 20:42 | 1363791 Threeggg
Threeggg's picture

"We view the current high prices as unsustainable"

High prices ? Hu ?

20 year NG chart say's something different.

http://www.tradingeconomics.com/commodity/natural-gas

Sun, 06/12/2011 - 20:43 | 1363795 Manthong
Manthong's picture

"The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report." (P.1 footer, above)

WTF?

Sun, 06/12/2011 - 20:52 | 1363800 Threeggg
Threeggg's picture

That's the CYA clause.

They wouldn't want any of their fleeced clients coming back and ................................!

Sun, 06/12/2011 - 20:46 | 1363798 Xibalba
Xibalba's picture

fuckers..... This winters gonna be expensive if you want heat.

Sun, 06/12/2011 - 20:50 | 1363802 Missiondweller
Missiondweller's picture

Is it now a game to see how many times they can use the word "transient"?

 

Its now become the most overly used word in finance. The old favorite was "bifurcation".

Sun, 06/12/2011 - 21:07 | 1363803 bob_dabolina
bob_dabolina's picture

:) 

/ng demand is being driven by the fact that nuclear ene is being phased out by major industrial countries...ya know, due to the fact that fukushima daiichi will make Japan unihabitable over the next decade.

Furthermore, should some entrepreneur come along and create a natgas run car....well, we wouldn't need the middle east any longer would we?

A natgas powered car would put the sand niggers back in the dirt. 

Sun, 06/12/2011 - 21:13 | 1363825 Irwin Fletcher
Irwin Fletcher's picture

Honda Civic GX, bitchez.

Sun, 06/12/2011 - 21:25 | 1363835 buzzsaw99
buzzsaw99's picture

put a natty pump in my garage and the world is mine bitchez.

Sun, 06/12/2011 - 21:35 | 1363841 bob_dabolina
bob_dabolina's picture

buy and fly.... 

NatGas is going to KILL it. The demand has never been so high.

Sun, 06/12/2011 - 21:49 | 1363857 OuaisBla
OuaisBla's picture

Production too.

Sun, 06/12/2011 - 23:45 | 1364019 Manthong
Manthong's picture

Must be a Phill..

How much did it cost installed and what area are you in?

Mon, 06/13/2011 - 00:31 | 1364082 Prometheus418
Prometheus418's picture

Or at least Bartertown.

Sun, 06/12/2011 - 22:00 | 1363871 lizzy36
lizzy36's picture

There are Nat Gas trucks currently in use.

The problem is that infrastructure to fully support nat gas transportation is a ten yr build out. Of course it would put millions of people to work, and take the US off of Crude oil as a main transportation fuel.

Obama has gone with battery cars. The VOLT. Of course the Volt is a joint partnership between GM and GE. Change you can believe in.

Sun, 06/12/2011 - 22:12 | 1363902 AurorusBorealus
AurorusBorealus's picture

For $1500 USD, many folk in South America have converted traditional autos to burn natural gas.  They have a nat gas tank in the trunk and mostly use the nat gas, switching to gasoline when they need power or are out of natural gas.  One liter of nat gas does not provide as many miles or the power of 1 liter of gasoline, but the price per mile is significantly lower.  Any long-term realistic solution of balancing U.S. trade, their consuming more than they produce, and their other economic imbalances will eventually have to include this simple solution.  In Brazil and Argentina, the governments promoted this by making all government vehicles nat gas-powered and creating filling stations.  Private filling stations quickly upgraded to retain government business.  Private vehicle owners followed in suit converting their vehicles.  Would seem to be a much too useful purpose to put the unemployed and the 4 trillion in USG spending.

Sun, 06/12/2011 - 23:11 | 1363968 Irwin Fletcher
Irwin Fletcher's picture

Here's a list of the cars in the US that can be converted to CNG:

http://www.ngvamerica.org/pdfs/marketplace/MP.Analyses.NGVs-a.pdf

Not as cheap as South America evidently. You can also buy a used fleet vehicle. I'm no expert on NG supply and demand, but Karl "ya can't eat gold" Denninger claims that it would never work, for what that's worth. 

Mon, 06/13/2011 - 08:51 | 1364444 Bicycle Repairman
Bicycle Repairman's picture

There probably is a natgas filling station in your area.  The DOE has a website that helps to locate one in your area.

Sun, 06/12/2011 - 20:56 | 1363809 zen0
zen0's picture

Who are these Goldman clients? Why would they keep doing what GS says if they get screwed everytime? It doesn't make sense.-38

Sun, 06/12/2011 - 20:57 | 1363810 The Real McCoy
The Real McCoy's picture

I could potentially see a short squeeze.. everyone's expecting it to drop right now, but it technically just broke through long term resistance and bounced off of the line as support.

Sun, 06/12/2011 - 21:15 | 1363826 Forgiven
Forgiven's picture

Goldman and Nat Gas...

They have been accumulating nat gas players for quite some time.  There's a small Marcellus Shale co. called Norse Energy that they have been raising their stake in.  NSEEY.PK owns 180,000 acres and over 3.7TCF of P1 reserves in the Marcellus property between Chevron and what used to be Chesapeake.  NSEEY looks like a small fish in the midst of a sea of nat gas.  Me smells M&A on the horizon.

Sun, 06/12/2011 - 21:19 | 1363830 OuaisBla
OuaisBla's picture

Natural gas is a contrary play.

Short July NGN1 contracts IMO. UNG fund is way overbought right now. So a Short call is not that off. The "go Short October contracts" was made last year in the same condition. History never repeat itself, specialy in the NG world. So going long October contracts might be definitely a good option when UNG overbought condition will be cleared.

Sun, 06/12/2011 - 21:51 | 1363861 lizzy36
lizzy36's picture

UNG shouldn't be touched with a 10 foot pool.

It is not overbought. It is suffering from sizeable outflows. As a result, its ordinary natgas-futures float, essential for managing daily creations and redemption's, is also being depleted.

As Olivier Jakob at Petromatrix points out:

that leaves the fund with the option of either shorting futures, and/or unwinding its $895m swap. We understand the fund is more partial to the latter option. Of course, if it did indeed go down that road it would most likely take a few days for its total return swap bilateral counterparty to unwind its related hedges and potentially provide the fund with front month futures instead. At least that’s how we imagine the terms might work.

One will only  know for sure if and when the UNG files an update and/or amends its daily holdings to exclude the total return swap it’s currently holding.

In the mean time, trade at you own peril.

Sun, 06/12/2011 - 22:05 | 1363880 Abiggs
Abiggs's picture

Indeed and thanks for insight!

UNG has never been a good NG-related investment as it reflects the commodity's downside yet greatly limits the upside with its inability to capture contango between months, all one has to do is pull up a 10-year UNG graph...

So any talk about UNG being overbought and thus having an effect on the Nymex future has zero relevance in this discussion...

Sun, 06/12/2011 - 21:26 | 1363832 PulauHantu29
PulauHantu29's picture

LMAO...................GS told their clients to dump oil and then one week later said they chnaged their mind and oil was "a buy."

Sounds like the converse of the "pump and dump" strategy.

Sun, 06/12/2011 - 21:31 | 1363836 buzzsaw99
buzzsaw99's picture

October is a chickenshit month to short. If they had any conviction they'd short July or January.

Sun, 06/12/2011 - 21:45 | 1363856 lizzy36
lizzy36's picture

yes. shoulder season.

Sun, 06/12/2011 - 22:05 | 1363888 ffart
ffart's picture

I think I'll add some SJT to my portfolio this week.

Sun, 06/12/2011 - 23:08 | 1363962 Paul Thomason
Paul Thomason's picture

This wrong.  The technicals for natural gas are actually quite bullish - in fact I might add it to our portfolio for subscribers it so bullish.  

Watch it and and see over the next few months.

here is the basic chart;

http://stockcharts.com/h-sc/ui?s=$NATGAS&p=W&b=5&g=0&id=p83994061894&a=236733278

 

Mon, 06/13/2011 - 07:03 | 1364272 css1971
css1971's picture

You should consider everything any banker says as Psyops.

Mon, 06/13/2011 - 09:33 | 1364560 OuaisBla
OuaisBla's picture

Your charts is great. But beware the Black candle that were drawn last week.

Go back and you'll see blacks candle mostly at the top of a range. They have been proven a good reverse trend indicator at the top so far.

Mon, 06/13/2011 - 00:25 | 1364072 Yen Cross
Yen Cross's picture

 That means a light trade. I'll call the Devil!

           Yen Cross.

Mon, 06/13/2011 - 07:02 | 1364270 PulpCutter
PulpCutter's picture

'Long' dry firewood!

Mon, 06/13/2011 - 09:28 | 1364552 OuaisBla
OuaisBla's picture

October is 4.79 this morning.  4.84 might have been a late call.

Mon, 06/13/2011 - 10:08 | 1364638 OuaisBla
OuaisBla's picture

October NGV1 is now at 4.72.

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