Another Nat Gas Margin Hike: Third In Two Weeks

Tyler Durden's picture


The CME is angry. And you won't like it when the CME is angry.

Moments ago, in the aftermath of today's nat gas jump to the latest $5+ close (due to the persistence of cold weather), the CME hiked NG margins by another 10%: the third such hike in the past two weeks. Of course, this means that just like gold speculators were the target in 2011 and "evil" crude oil traders were demonized by the Margin hiker-In-Chief, so too the first commodity price shock of 2014 - that which America's consumers will experience when they get their January (and likely February) utility bills - will be blamed on, you guessed it, evil nat gas speculators. It appears that the CME will not rest and will keep hiking margins until nat gas fall back to whatever the president deems a "fair" price.

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Tue, 02/04/2014 - 18:52 | 4401858 knukles
knukles's picture

When this circus finally wakes up, Medicare is gonna look like a good deal.


PS  One of the nationals (NYT?) had an article stating that the reason nat gas prices were so low and staying there was that we had all the supply in the fucking world at our fingertips thanks to fracking, etc., so the peasantry wouldn't freeze to death in the dark.
"Don't worry, be happy" as was pointed out yesterday.

Oy yoy yoy...

Tue, 02/04/2014 - 19:41 | 4402019 firstdivision
firstdivision's picture

Well considering the Marcellus is sitting capped due to no transmission from the well, well draw isn't an issue.

Tue, 02/04/2014 - 20:03 | 4402070 Flakmeister
Flakmeister's picture

Can't say that about the Barnett and Haynesville, both of which are looky toppy...

Hey, even the NG guys know that loosing money on the NG from damn well near every well is not a great business model. You need liquids to pay the freight. And the infrastructure is in no position to move any more liquids... 

Tue, 02/04/2014 - 21:14 | 4402270 Rock On Roger
Rock On Roger's picture

There are lots of gas wells that make money, they aren't shale though.


Stack On

Wed, 02/05/2014 - 03:43 | 4403073 nflux
nflux's picture

I have a few family members that are getting royalties from Marcellus wells. They are making good money still but they are paying out less than half what they were since last spring. The production life of these wells are a joke if they can't be refracked to extend their life in a meaningful way.

Tue, 02/04/2014 - 19:58 | 4402057 Flakmeister
Flakmeister's picture

It's all good and gonna get better.... TBTB cannot fathom anything but so it must....

The DOE has approved LNG export licenses that represent a significant fraction of total current production all the while the US is still a net importer of NG. The result of this will be a de-regionalization of the NG market, local NA prices must rise to reflect what the world is willing to pay. 

Either they drank their own kool-aid and believe their forecasts or that is just another tale of insiders looting of the country via regulatory capture.  I think we know we one it is...

Every major infrastructure project under discussion is tailored to bring hydrocarbons to the waters edge for export. The outcome will be higher domestic prices in each case...

As impressive as shale NG has been, they have to replace ~40% of current production every year to stay even. That is the equivalent of a new Texas every year....

Tue, 02/04/2014 - 21:48 | 4402384 SAT 800
SAT 800's picture

Good old CME; doing just the right thing. since I happen to be short; drive those evil speculators out, go CME !.

Tue, 02/04/2014 - 18:57 | 4401874 samsara
samsara's picture

Maybe the "Fair Price" will be higher than anyone expected.

Maybe people are starting to look at the depletion graphs and production projections on the "Pop Bottles" known as Nat. Gas Wells?

Tue, 02/04/2014 - 18:58 | 4401881 Pinktip
Pinktip's picture

Were prices really this high in 2008 ?

Tue, 02/04/2014 - 19:38 | 4402014 Flakmeister
Flakmeister's picture


Tue, 02/04/2014 - 19:28 | 4401960 Bad Attitude
Bad Attitude's picture

I don't care about a "Fair Price." I want a royalty check!


Tue, 02/04/2014 - 18:57 | 4401880 Goldilocks
Goldilocks's picture

The difference between commodity and fiat money (3:07)

Tue, 02/04/2014 - 18:59 | 4401884 Tasty Sandwich
Tasty Sandwich's picture

But I thought we were going to convert every vehicle on the planet to natural gas in order to mitigate the effects of peak oil?

Tue, 02/04/2014 - 19:08 | 4401909 ElixirMixer
ElixirMixer's picture

Could someone explain what ulterior motives CME has for hiking margins? Nat Gas prices are in a period of volatility and I thought margin hikes were a way to manage volatility risks for a clearing house?

Tue, 02/04/2014 - 19:28 | 4401964 ConManipulation
ConManipulation's picture

I am going to start composting my dumps & collecting the methane, just like they do in Third World Countries.

Plus I am going to start bottling all of my farts!  My families' and friends', too!


Tue, 02/04/2014 - 22:35 | 4402495 americanspirit
americanspirit's picture

ConManipulation - good idea. Actually household biogas digesters that use food scraps, yard clippings and - er- other stuff are common throughout the world. There are several Swedish technologies that work great - zero odor, plenty of gas for cooking and heating water, easily maintained and low entry cost. Not practical for apartment dwellers but anyone in a standalone house - even in the burbs - could install one of these and stop buying nat gas (or at least cut way down), stop paying to have garbage hauled away (trash still has to go somewhere), and wind up with some rich, pathogen-free fertilizer for your garden. And if you are rural and on a septic system, even better, because all those 'solids' that you're flushing down the toilet can go instead to creating cooking/heating gas too.

Granted BioGas doesn't have the heat value of nat gas, but these swedish devices are pretty far advanced and there are easy and cheap or no-cost ways to 'sweeten' the substrate so that you can boost the methane content to the high 70% range. Plus if/when the nat gas pipeline shuts down or becomes unaffordable you can keep on cookin' for free.

Tue, 02/04/2014 - 20:09 | 4402080 0b1knob
0b1knob's picture

The entire tar sands industry which the greens are so opposed to is only made possible by cheap natural gas.  Nat gas goes up and the whole thing collapses like a house of cards.   I'm not an envirolunatic, just poining something out.

Tue, 02/04/2014 - 21:36 | 4402340 TheRideNeverEnds
TheRideNeverEnds's picture

But if the margin hikes cause already stretched shorts to cover or brokerages to force liquidations will the price of nat gas not increase dramatically? 

Tue, 02/04/2014 - 23:06 | 4402586 Paracelsus
Paracelsus's picture

LMAO. Once again having paper in your hand is no good when you really need a physical asset.

This reminds me of all the hedgies who are trying to sue Porsche in Germany for when they were caught on the wrong way bet with VW stock (on a Friday).

Not so much fun when you are on the other side of the driveshaft....

Anyhow,this polar vortex thing has been on for weeks now.Weren't they able to hedge their NatGas trade? Or were they stupid? Or did they think they could stay in the game long enough for their luck to change?

When,oh when,are we gonna stop all this paper "futures" shit,hypothecating to the moon.

   2014.  THIS IS IT.....

Wed, 02/05/2014 - 04:56 | 4403127 williamson
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