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Blue Lacy Advisors, LLC - Reducing the Pace of Production

Minneapolis, MN | February 14, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC


Summary


Through January 28, 2023, the cumulative deficit to Heating Degree Days (“HDD”) for the year reached 227, wider by 19 HDD on the week. Even as demand rises with this cold stretch, it is unlikely to be sufficient to cause a real rally at the Hub (Henry Hub). In other words, nothing has changed with this cold front. It would take a >25% rally in the March contract to retake $3, which seems unlikely without a winter storm like 2021. The winter strip (Nov23-Mar 24) continues to trade at >$1 premium to summer (Apr 23-Oct 23), despite the entire curve moving lower over the last week. Winter NYMEX is trading around $3.90 as of 1:30 PM Central on Friday, while the summer strip trades below $2.90. This wide contango incentivizes storage injections during the summer. With this combination of price, contango, and storage position, the message is stronger: reduce the pace of production.



*This summary is based off February 3, 2023


A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers


included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


 

Meet the Author!


Phone: +1-832-413-3124


Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.


He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.


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