The introduced below forecast is not investment advice and related to the trading process that Oilgasfund use for https://collective2.com/details/126786783 . Inventories outlook has been made based on STEO model with adjustments on export-import activities
Inventories outlook for the next 12 months remained in the bearish configuration. Minimum for end of withdrawal season about 2 000 bcf, and max is 4 100 (November). In both cases it stay above 5 years average.
Natural gas prices came deeper into a bearish zone and last year forecast mainly was fulfilled. For this year I do anticipate the continuation of bearish formation with a wide range of price fluctuation between 2.4 and 1.8. This scenario is the main and does not include slow down the risk of the US economy. If risk will be materialized the price range will be shifted to 1.5 – 2.2.
The most important risk for a long position is negative rollover yield that will be associated with huge contango and will be from 30% to 40% for the overall year. This means that the price of UNG disregarding to price dynamic of Natgas will lose up to 40% of its value due to contango impact and as result, I do anticipate that the price of UNG will fall below 10 USD till the end of the year.
OGF going to maintain a short position in Natgas as part of the contango monetization strategy. A short position will be opened in UGAZ or put options in UNG will be bought.
As part of the bearish expectation Fund will systematically sell CALL options on a monthly basis. Details disclosed at Oilgasfund profile