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Goldman Closes Nat Gas Long, Says "Time To Take Profits"

Tyler Durden's picture




 

Back when everyone had given up on natgas in April when John Arnold was liquidating the Centaurus Master Fund and everyone thought it was an indication of the collapse in nattie end demand (it wasn't), the general peanut gallery said the time of bidless gas is coming. It didn't. Instead, as we then said expected, and as Goldman recommended, it was the time to buy natgas. We are now nearly 100% higher from those April lows. For those who listened to ZH and Goldman, the time to be greedy is over, and as David Greely from Goldman says, it is now "time to take profits." Feel free to sell to all those other banks who are once again about 6 months late to the party.

From Goldman:

With natural gas prices rallying to our target, it’s time to take profit on our long summer 2013

 

We first recommended long positions in Summer 2013 NYMEX natural gas in April 2012

 

On April 11, 2012, with prompt NYMEX natural gas trading at $1.98/mmBtu, we first recommended a long position in Summer 2013 NYMEX natural gas contracts. Although we expected that natural gas prices would likely remain depressed for much of the summer of 2012 in order to motivate sufficient coal-to-gas substitution to avoid breaching storage constraints by the end of the summer injection season, we anticipated that these low prices would also drive a number of additional tightening shifts in the supply-demand balance, most notably reduced drilling activity, which combined with the expected return to normal weather for the 2012-13 winter after an extremely mild 2011-12 winter, would substantially reduce the level of coal-to-gas substitution required in 2013. We estimated that this lower level of coal-to-gas substitution could be achieved at $4.00/mmBtu NYMEX natural gas prices.

 

With Summer 2013 NYMEX natural gas prices rallying to our target, it's time to take profit

 

At the time, Summer 2013 NYMEX natural gas was trading at $3.36/mmBtu, well below our price target of $4.00/mmBtu. Consequently, we recommended buying Summer 2013 NYMEX natural gas. The trade settled today (October 11, 2012) at $4.02/mmBtu. With Summer 2013 NYMEX natural gas now trading above our $4.00/mmBtu price target, we now recommend closing the trade and taking the potential profit of $0.66/mmBtu, or 19.6%. Although we are closing our trade, we continue to expect prompt NYMEX natural gas prices to continue to rally to $4.00/mmBtu next year. Front month NYMEX natural gas prices have rallied by $1.70/mmBtu, or 89%, over the past six months to settle at $3.60/mmBtu today (October 11, 2012) after bottoming out at $1.91/mmBtu on April 19, 2012.

 

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Fri, 10/12/2012 - 10:31 | 2881601 LawsofPhysics
LawsofPhysics's picture

So, go long then?  Fuck you GS, and fuck you Bernanke!

Fri, 10/12/2012 - 10:41 | 2881647 Comay Mierda
Comay Mierda's picture

UNG chart looks bullish as fuck.  GS trying to leave the muppets behind on this soon to be EPIC long term rally

Fri, 10/12/2012 - 14:22 | 2882360 beachdude
beachdude's picture

A few weeks ago I heard Boone mumble $4 natty by December. Went with UNG calls, doing quite nicely.

Fri, 10/12/2012 - 10:32 | 2881603 thedrickster
thedrickster's picture

So.....I should be maxing out my CCs with a cash advance and buying CHK hand over fist?

Fri, 10/12/2012 - 10:34 | 2881608 LawsofPhysics
LawsofPhysics's picture

Yes.   wonder how those natgas conversion kits are coming for the U.S. ARMY's tanks?

Fri, 10/12/2012 - 11:34 | 2881816 Stock Tips Inve...
Stock Tips Investment's picture

Like it or not, the price of natural gas is showing a long-term negative trend. This price has had a technical rebound from April, which was recently confirmed in June. In mid-September, natural gas line broke its downward trend for the first time since 2008. Most likely to occur a correction to its new support level. If it breaks, we can see a significant way up. Hopefully the correction and then take the decision.

Fri, 10/12/2012 - 11:38 | 2881831 LawsofPhysics
LawsofPhysics's picture

Frontrunning GS, now that is living on the edge.

Fri, 10/12/2012 - 10:33 | 2881605 LongSoupLine
LongSoupLine's picture

 

Goldman wants more (see: greed) at a lower price.

 

Fuck you Goldman!

Fri, 10/12/2012 - 10:34 | 2881607 AlphaHunter001
AlphaHunter001's picture

 

We're also seeing utlities switching to coal as the price of gas rises... also lack of storage facilities will continue to be a problem (driving down spot prices) until the US builds LNG facilities to transport the commodities overseas... GS looks like they've got the timing right this time

Fri, 10/12/2012 - 10:37 | 2881616 thedrickster
thedrickster's picture

.

Fri, 10/12/2012 - 10:35 | 2881614 duncecap rack
duncecap rack's picture

GS and ZH,new BFF's?

Fri, 10/12/2012 - 10:40 | 2881640 Tyler Durden
Tyler Durden's picture

That... or the facts. From May, when CHK plunged: "What Is The Upside In Chesapeake?" Now 30% higher.

Of course, nobody is forcing you or anyone else to be informed what major banks are telling their clients to do on key commodities. After all who needs information right?

Fri, 10/12/2012 - 10:48 | 2881675 duncecap rack
duncecap rack's picture

I was just surprised by the tone, I am more used to ZH mocking the calls of GS, particularly those of Stolper, rather than being proud to being on the same side of a winning call.

Fri, 10/12/2012 - 10:57 | 2881695 austin0388
austin0388's picture

Selling Natgas now makes about as much sense as selling Gold at $500 because it was "nearly 100% higher".  Yes, Natgas can go down again, but long-term it is very much a keeper.

Sat, 10/13/2012 - 23:24 | 2886057 Muppet of the U...
Muppet of the Universe's picture

Goldman does not lie.  Usually they do.  Either that, or they are retarded.

This is not a retard move.  It is a brilliant move.  I am already short Nat Gas.

EVERYONE, and I mean EVERYONE, probably even their clients, are starting to think they can just take the exact opposite bet of Goldman, and make money.

Goldman is setting you up.  They are pulling the OLDEST trick in the book.  there is no greater fool theory going on here, just 101 basics.  Getting muppets to buy the top, panic, sell, and short in desperation.  Perfect set up.  Perfect execution.  Well played GS.  Well played.

Nat Gas is ultra volitile with massive price swings starting up.

This is to be expected!  This is what happens when a commodity like nat gas finally stops falling and starts swinging up- Momentum driven swings that rock the market far past any sense of FMV.  Recently, this ability to find FMV has been faster, and I expect with the recent giant jump in prices from 2.6/2.8 to 3.6, There is going to be a substantial correction before prices continue up again.

That is not to say it cannot continue going up.  It is only to say there are corrections in all commodities, and when it is time to expect one in a given commodity, it is generally best to follow a major trading firm/bank.

Fri, 10/12/2012 - 12:54 | 2882130 buchesky
buchesky's picture

I was thinking the same thing.  You normally pitch GS calls as the contraindicator.  You're undermining your conspiracy theory appeal...

Sat, 10/13/2012 - 23:01 | 2886061 Muppet of the U...
Muppet of the Universe's picture

If Goldman was always wrong, then they would be giving you the greatest trading advice there is.  One cannot afford to be easily classified or they will risk being predicted.,.

Sat, 10/13/2012 - 23:07 | 2886070 Muppet of the U...
Muppet of the Universe's picture

Well said.  As a trader who constantly recommended a long nat gas at 2.6-2.8, I think I have a fair grounding when I say that Goldman's expectation of a pullback, however severe, is a large potential possibility.  Considering that I much more greatly enjoy shorting items, considering the extremely marginal, although still noteworthy, risk probability of flash crashes...  I would advocate that traders be wary of a pullback from such a substantial and fast gain like that of Nat Gas's.  Tyler is... one of the best things to ever happen to my life. & I am greatful for every chance I get to read their material.  Thank you for article.

Fri, 10/12/2012 - 10:37 | 2881620 Watts_D_Matter
Watts_D_Matter's picture

Hey GS...Even a broken watch is right 2 times per day....(assuming you are not on military time)

Fri, 10/12/2012 - 13:58 | 2882339 dannyboy
dannyboy's picture

Goldman is right every time of the day. It's just about sifting through the echo chamber of bullshit to realize which are the real trades and which are the muppet roasters, that takes logic, skill and understanding of how things work. Which is why those of us that actually listen to tyler make alot of money.

Fri, 10/12/2012 - 10:37 | 2881621 Quinvarius
Quinvarius's picture

Blind squirrel found a nut...or did he?  We shall see if nat gas now goes full retard to the north.

Fri, 10/12/2012 - 10:38 | 2881629 diederr
diederr's picture

Time to buy Nat Gas Muppets!!!

http://www.youtube.com/watch?v=cRTjksM3YAs

 

Fri, 10/12/2012 - 10:38 | 2881630 haskelslocal
haskelslocal's picture

Am I seeing things? GS and ZH on the same page? Has it not been years that ZH has been contrary to everything GS? What did I miss?

Heck Tyler, even if you said listen to GS I'd have to have thought you were /sarc.

Fri, 10/12/2012 - 10:43 | 2881657 Tyler Durden
Tyler Durden's picture

Zero Hedge is the only place where people will complain for getting market moving information for free.

Fri, 10/12/2012 - 10:46 | 2881666 fonzannoon
fonzannoon's picture

Market moving with a side of humor.

Fri, 10/12/2012 - 10:50 | 2881677 Dr. Engali
Dr. Engali's picture

The complainers are few and far between. Let them whine.

Fri, 10/12/2012 - 10:51 | 2881679 haskelslocal
haskelslocal's picture

Not the only place... CNBC is a crowd favoite if you're into dart board predictions. Your capability trumps my ability to keep current! Thank you Tyler, back to making soap for me.

Fri, 10/12/2012 - 11:33 | 2881815 LongSoupLine
LongSoupLine's picture

marking moving information with the added rare benefit of the truth behind said moves.

Sat, 10/13/2012 - 23:12 | 2886074 Muppet of the U...
Muppet of the Universe's picture

If only they would realize, SHIT DON'T GO IN 1 DIRECTION FOREVER BITCHEZ.

 

Thank you Durdenzzzzz.  If goldman were always wrong, then they would be easiest best in the world.

U want real golden strategy?  Find 10 random ppl at a pop music concert.  Set them down in a trading room, Give some indicators and charts and info.

Make them think they are trading real money.   Then take exact opposite bets of all 10 traders.  You will make money.  After a while, dump the 10, and find a new 10.

You will make a killing.  Seriously.

Sat, 10/13/2012 - 23:20 | 2886083 Muppet of the U...
Muppet of the Universe's picture

Wait!  What about the guy that ends up getting lucky?

-It won't last.

Wait!  What about the guy that turns out to be a trading prodigy?

-Hire him.

Fri, 10/12/2012 - 10:47 | 2881670 firstdivision
firstdivision's picture

Or maybe it was posted so we know to do the contrarian to what they are telling their clients (i.e. do what the prop desk is doing).

Fri, 10/12/2012 - 10:40 | 2881644 Flakmeister
Flakmeister's picture

NG has no where to go but up, but it may take a while....

Fracked well production quickly falls off a cliff and the producers have not figured out yet how to produce at a rate consistent with them making money...

The E+P guys have been hemmorrhaging cash, to the tune of $20 billion p.a. and they are desperate to stop the bleeding...

Fri, 10/12/2012 - 10:46 | 2881663 firstdivision
firstdivision's picture

GS is gonna throw the longs off the Nat Gas bus like this http://www.ibtimes.com/bus-driver-uppercuts-teen-girl-cleveland-video-845203

Fri, 10/12/2012 - 10:51 | 2881680 Watts_D_Matter
Watts_D_Matter's picture

Dam B...Dat ho got her teefers popped...Where her Obama phone at?  sheeeeeeeeeeeeet

Fri, 10/12/2012 - 11:03 | 2881713 vote_libertaria...
vote_libertarian_party's picture

How did she even stand up after that punch?

Fri, 10/12/2012 - 10:47 | 2881668 Dr. Engali
Dr. Engali's picture

Tells me to buy nat gas on any dip. If you're a short term trader then take profits, but the way I see it is nat gas only has one long term direction to go.

Fri, 10/12/2012 - 11:01 | 2881707 firstdivision
firstdivision's picture

Weather dependent.  If this winter is similar to last, then you'll get killed sitting long.

Fri, 10/12/2012 - 13:49 | 2882308 Just Ice
Just Ice's picture

yeppers...and I guess that can be considered biased opinion since I've recently scaled in short...supply is very bearish for market, the power plant demand that brought in bullishness to sop some of that up was also price dependent...that demand will switch right back to coal if price continues north

 

 

Fri, 10/12/2012 - 11:20 | 2881769 fonzannoon
fonzannoon's picture

How you playing it doc? I won't hold you to it. I own some of the producers.

Fri, 10/12/2012 - 10:55 | 2881688 DUNTHAT
DUNTHAT's picture

Dissecting the natural gas market--FREE-- courtesy of www.CommitmentsOfTradersAnalytics.com ----

 

https://docs.google.com/open?id=0B16Nxp5pgJBzaVpBU21nNTdoNms

Fri, 10/12/2012 - 10:56 | 2881691 ROCE
ROCE's picture

So the inverse goldman trade is off ?? 

What will happen to all the muppets ?

Fri, 10/12/2012 - 10:57 | 2881693 Catullus
Catullus's picture

Yet they keep their buys on merchant gen. Go ahead and sell deregulated power generators if you think this is the case as well.

Fri, 10/12/2012 - 11:01 | 2881708 Yen Cross
Yen Cross's picture
"Goldman Closes Nat Gas Long."  I didn't realize GS was on shortened hours/schedule today.
Fri, 10/12/2012 - 11:22 | 2881779 Watts_D_Matter
Watts_D_Matter's picture

Ok...Just to testthe theory of GS...I will be selling 50K Puts at 23 Oct 12 ...Hope I dont loose my shirt....

Fri, 10/12/2012 - 11:54 | 2881895 adr
adr's picture

It really is just what the consumer needs, higher prices to heat their homes along with the massive fiscal cliff tax bill. $2.75 is a fair price for nat gas that allows rigs to be profitable and makes it generally affordable at the retail level. You start going above $4 and the end cost to consumers starts hitting the mid $6-7 level. That puts a monthly heating bill close to $200 for a 1500 sq ft home.

By all means though, make bets on commodities you never instead to take delivery of, hoping they pay of big to the upside. Fuck me over a log, I can take it.

I would rather see massive short positions set up for the hope that my heating bill might decline by $50 instead of going up by $100.

Fri, 10/12/2012 - 16:27 | 2882881 Flakmeister
Flakmeister's picture

Show me one producer, who is not hedged, that makes a profit at NG at $2.75....

I dare you...

Fri, 10/12/2012 - 11:57 | 2881908 q99x2
q99x2's picture

Eventually GS will have to be right but I'm pretty sure they will wait until everything is priced at 0.

The Gov't whatever that is, maybe the banko-politico racketeers, aren't reigning the collapsing elements of the economy this time. This time does seem different. I think they have a problem with the Totus and his SS Comandant Holder. Look like CFR/Israel wants Romney this election.

Fri, 10/12/2012 - 12:06 | 2881948 Meesohaawnee
Meesohaawnee's picture

WHO FUCKING CARES!

Fri, 10/12/2012 - 13:50 | 2882298 swissaustrian
swissaustrian's picture

I called the bottom in March one month early, and I picked SWN instead of CHK. SWN is the way better company. CHK is still an accident waiting to happen, they're massively overstating their reserves.

http://www.pmbug.com/forum/f9/natural-gas-trading-below-average-producti...

Fri, 10/12/2012 - 14:42 | 2882471 katchum
katchum's picture

And I just turned long because of the high roll over cost: http://katchum.blogspot.be/2012/10/natural-gas-set-to-rise-10.html

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