Liquids or non liquids, that is the question.

The always hawkish energy eye of Colorado’s Bentek Energy recently observed the growing effect of liquids-rich plays on the U.S. gas production profile.

Speaking at a National Energy Services Association forum last week, Bentek managing director Rusty Braziel noted just how critical liquid-rich gas plays are becoming. Said Braziel, “Some companies could sell their liquids and give the gas away for free and still make money.”

This is an important point for anyone investing in natural gas. High-value liquids from plays like the Eagle Ford shale in Texas make producers in these areas somewhat insulated from gas prices. Even at low prices, producers can keep running these wells at a profit.

This flies in the face of conventional wisdom. Which suggests that “low prices should cure low prices” by forcing producers to shut in wells, ultimately decreasing output and raising bidding for the remaining supply.

Braziel illustrates this effect with some economics from different U.S. plays.

In the dry-gas Haynesville shale, wells yield a 25% rate of return at a $4/mcf gas price. Compare this to the Eagle Ford shale. In moderately liquids-bearing sections of this play, rates of return at $4/mcf run 50%.

Here’s an even more staggering data point. In the most liquids-rich parts of the Eagle Ford, return rates at $4 gas can be as high as 200%.

The bottom line is that the average Eagle Ford producer can make money at a Bentek-estimated gas price of $2.04/mcf.

Meaning we’re far from curbing production at $4/mcf gas. At least for the right plays.

Here’s to the sweet spots and to a profitable year for everyone! Thank you for reading my article!

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I’ve long been a believer in Elliott Wave Theory, which was developed in the 1930′s by R.N. Elliott. He was a man decades ahead of his time, and to this day his work remains revolutionary in tracking and forecasting market and commodity trends and cycles. This theory forms the basis of my work for market forecasting and trading and investing. While the crowd continues to wait for the next crash, the Elliott wave patterns I’ve been outlining have continued to foretell a bullish move possibly of historic proportions. Taking advantage of this type of move means you need to tune out the noise from CNBC, all of the jobs data, and the negative mantra. Everyone knows that stocks climb a wall of worry, but you have to have a method to let you know to stay long and where best to invest during a super cycle Elliott Bull Wave pattern as we are in now.

My theory back in late February 2009 was that the market was about to bottom and nobody knew it. I wrote an article on 321Gold.com at the time to outline my reasoning and had a chart showing 1200 on the SP 500 as a likely target. At the time the SP 500 was trading around 720 and had not yet completed it’s drop to 666, but was within a few weeks. Interestingly to me anyways, at 666 the SP 500 bottomed and not randomly at all! That 666 figure was an exact 61.8% Fibonacci re-tracement of the 1974 lows to the 2000 highs Bull Cycle. Often crowds act in patterned behaviors that are formed around Fibonacci mathematics. Typical re-tracements are 38%, 50%, 61.8%, or even 78.6%. Combining Elliott Wave patterns with Fibonacci sequences allows me to confirm or help firm up a forecast. That drop over five Fibonacci months completed a multi year cycle from the 2000 highs to the 2009 lows, and it did so right at a clear Fibonacci pivot point. This is why I believe the next many years will be very bullish for stocks, and most investors will not be on board.

Those Fibonacci and Elliott Wave patterns gave me the heads up to start turning bullish, coupled with the sentiment readings which were equally as bearish as the October 2002 bottoms. In addition, there was way too much discussion about deflation. The rubber band in essence was stretched so far to one side on the sentiment gauges and deflation talk, that it would only take a slight shift towards inflation to move stocks much higher.

Fast forward to October 2010, and we now see the ravages of inflation becoming very apparent some 18 odd months later. Gold is at $1350 per ounce, Silver is at $24, the SP 500 is heading back to 1200, Corn, Sugar, Coffee, Copper are all at huge highs. What investor’s don’t understand is stocks are one of your best asset classes in the earlier periods of an inflationary shift, what I would call an inflationary period of prosperity worldwide. Elliott Wave patterns most recently that I outlined on my market forecast service alerted my subscribers to prepare for a massive bull run once the 1094 area on the SP 500 was crossed to the upside.

Given the understanding that inflation would become the new trend, we took multiple positions in Gold stocks and Rare Earth metals stocks ahead of the curve. Some of our recent picks included Hudson Resources at 63 cents in August, now trading at $1.30. Others include BORN at $8, a Chinese Corn based producer of Alcohol that ran to $19 within 7 weeks. We were investing in Rare Earth stocks almost 12 months ago, including REE at $1.80, and it’s now trading over $13.00 a share! Even up to the present time, my ATP service has been positioning our subscribers into Tasman Metals at $1.54, now $2.28 and Quest Rare minerals at $4.10 now $5.50. These moves are happening in stunningly quick periods of time, so being positioned ahead of those moves is crucial.

Gold and Gold stocks have obviously had a very strong move to the upside. Back in August of 2009 I forecasted a massive five year advance in Gold and Gold stocks. This again was entirely based on Elliott Wave patterns I recognized and crowd behavior. Investors will recall the 13 year bull market in tech stocks that started in 1986 when Microsoft went public, and ended in 1999 when AOL was sold to Time Warner for 150 billion. Well, the first five years of the Tech Bull nobody participated except the early investors. Intel and Dell also went public, along with EMC and others. By the time 1991 rolled around, investors kind of woke up and start buying. The problem was they were late, missing the first five years. At that point Tech stocks bucked and kicked up and down with no net gains for three years. Investors gave up again in 1994, and then we began a torrid 5 year rally to 1999. It was not until the last 12 months of that rally that everyone piled in, herd behavior in it’s finest form. Well, we are seeing the same patterns now in the precious metals areas of the market. The final 5 years started in August of 2009, kind of like 1994 in tech stocks. The first 5 years were 2001-2006 where Gold funds returned 30% compounded per year, by the time everyone got on board the funds did nothing for then next three years. Everyone gave up and lost interest, and that was the August 2009 buy signal.

Bringing us full circle, investors continue to shy away from this stock bull market following the five month crash of nearly two years ago. This is exactly the psychology present in an early stage bull market. Going forward from here, I look for the SP 500 to hit 1220 at the top of an Elliott Wave three from the 1040 lows in the summer. That will be followed by a correction pattern and then we will resume the advance to new highs on this bull market stretch from March of 2009. Gold should work it’s way up to $1480-1520 if I’m right on it’s bull move from the $1155 lows this June. Below we have a chart of the SP 500 on a long term basis, and it is currently in the third wave up from the 1010 lows on July 1st. This wave pattern is powerful and should run to at least 1220 intermediately. In time, this multi-year bull market could power to all-time highs and really upset the Bears.

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The thing most speculators / market observers can’t figure out about the above however is that the Fed, being center in the larger price managing bureaucracy, uses the above understanding(s), in that bearish sentiment in $ related betting markets (think derivatives, ETF’s, etc.) will support its price, which in turn will aid in dampening demand for precious metals. That, ladies and gentlemen, is the whole idea around Fed meetings these days – to confuse the heck out of people and keep the traders on edge. This in turn allows the Fed to carry on in its price managing ways until the sentiment loop becomes exhausted.

And as far as the $ is concerned, speculators are betting to the extreme (see Figure 12) that a bounce is immanent, making such a reality unlikely until after ETF options expiry next week (UUP is the bullish $ ETF), even if the Fed does not follow through on the market’s expectations of QE II. So, this should make for some increasing volatility in coming days (which is happening already today), however again, don’t expect something big and lasting until post options expiry on the 20th. After that, and especially if as mentioned Monday, the high yielding (risky) bonds brokers and hedge funds have been riding (with all the liquidity flowing into the bond bubble of late) are leading down, which happens to already be the case, expect volatility to pick up as we enter September. (i.e. in addition to high yielding bonds leading lower, especially if open interest put / call ratios make direction changes.)

Speaking of which, you likely noticed US index open index put / call ratio plots were updated here yesterday to assess sentiment given this volatility. Because if the S&P 500 (SPX) breaks 1110 today, it would breach a trend-line extending back to last month’s lows, raising the specter normally supportive sentiment based drivers have become ineffective is controlling price direction(s). I see SPX futures are already suggesting the cash market will open below this level, however again, it’s difficult envisioning a rout in stocks developing as we move into options expiry even though it appears the Fed is now completely impotent in that put / call ratio profiles for US stock indexes, the CBOE Volatility Index (VIX), high yielding bonds (HYG), and the $ are not supportive of such an outcome.

As a matter of fact, and ignoring the fundamentals for now, the overnight price action is quite surprising given the Fed’s pledge to monetize bonds increasingly yesterday, this and the sentiment picture running into expiry next week. Previously, this kind of picture would have yielded quite a different result, which is likely a legitimate shot across our collective bow(s) that it’s different this time, and that the effects of the buyers strike on Wall Street are about to come home. (i.e. the nightmare has now arrive for the larger bureaucracy.) It’s either that or the bureaucracy’s price managers don’t like the fact it looks like gold and silver are about to bust a move higher and they are allowing stocks to fall in order to keep people thinking deflation.

Leaving conspiracy theories aside for now however, in spite of all this from a technical perspective the VIX is poised to rally (and stocks to plunge), which would be the natural path at the moment. (See Figure 1)

So, if I had to guess on what will transpire between now and options expiry the 20th, although we could have a trend break in stocks here, next week should still prove to be market(s) friendly towards equities, with a testing process associated with breaks this week being the result. And who knows, perhaps the breaks won’t even last the day, making all such talk moot. Such an outcome would not be surprising considering yesterday’s price action in high yield bonds, where although cycle influences have rolled over (MACD, etc.), prices remain buoyant. (See Figure 2)

Of course when one looks at the matrix behind the scenes (ratios) the picture appears quite different. And although one could not aggressively bet on the head and shoulders pattern in the trade breaking lower in the iShares iBoxx High Yield Corporate Bond Fund (HYG) / iShares iBoxx Investment Grade Corporate Bond Fund (LQD) Ratio seen below, based on the way stock futures are dropping this morning, who knows, it could happen anyway. (See Figure 3)

But that’s the way these price managers work. They see gold and silver are about to break out and take the larger equity complex down to prevent this via a deflation scare. Then, when they think they have the market(s) sufficiently rattled, magically (think short squeeze), a bid comes back into stocks like nothing ever happened, which again, is likely what we will see next week. After expiry next week, if stocks turn down on their own, then price managers will worry about not allowing things to fall off a cliff after gold and silver have been smashed lower. This tactic, along with other elements of the price suppression scheme, has been the bureaucracy’s modus operandi in keeping precious metals prices under control for some time now. Too bad for them physical supplies are now running out fast with the larger system about to implode, no?

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. As you will find, our recently reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key’ information concerning the markets we cover.

And if you are interested in finding out more about how our advisory service would have kept you on the right side of the equity and precious metals markets these past years, please take some time to review a publicly available and extensive archive located here, where you will find our track record speaks for itself.

Naturally if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. We are not registered brokers or advisors. Certain statements included herein may constitute “forward-looking statements” with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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They were gifts for a special occasion on Tuesday night. They absolutely needed to be done by earlier that afternoon.

When I ordered, the company assured me the snapshots would be done by early Tuesday. Just to make sure, I stopped by Monday at the electronics shop that functions as the pick-up location. Yes, they said, the order would be shipped Tuesday morning and should be in store by noon.

Of course, when I arrived Tuesday at 3:00 PM, the photos were nowhere to be found. “Late”, the disinterested clerks at customer service told me. Happens all the time, they said.

Okay, I said. I need these photos for a party in two hours. What can we do?

The initial reaction was a litany of excuses about how this same thing has happened a thousand times before. And how there was nothing the clerks could do.

I told them I had the digital file with me. Could I print it right now on some photo paper? Wasn’t as fancy as the custom order, but at least I’d have something in hand for the party.

No, they said. They don’t do that kind of thing.

You’re an electronics shop, I prodded. Surely you have a computer and printer somewhere?

Finally they conceded that, yes, maybe the guy in imaging might be able to find one somewhere. Go talk to him.

Could you call him for me, I asked. So he understands the situation?

More feet dragging. “Well, I can see him over there, and he looks kind of busy.”

Could you just call him, I pushed. Finally, they did. And he came over. Then gave me the same spiel about how they don’t usually do that kind of thing.

Could we just look for a printer? Maybe in the back?

Finally he remembered that, yes, there might be one in the camera center. Which turned out to be broken. Maybe someone else would have an idea, I suggested.

Finally, (again after much prodding) we found another employee who knew there was a store computer off in a corner, hooked to a printer. He found a sheet of glossy paper. It took all of two minutes to download and print the photo.

This after twenty minutes of hemming and hawing about how “we don’t usually do that” and “I don’t think that will work”.

I am going somewhere resource-related with this.

The experience reminded me of some work I’m doing on a mineral exploration project.

Exploration is a complex business. Ore bodies are almost never straight-forward. And in most cases the only information the exploration team has about these complex structures is gained from pencil-thin (relatively speaking) drill cores. The rest of the interpretation has to be supposed from this tiny bit of info. Billions of dollars ride on this work.

During the course of a drilling program, the working deposit model often changes ten, twenty or a hundred times. On our project, we were coming up with geological surprises (some pleasant, some disappointing) almost daily.

This means you have to think on the fly. One new piece of information might totally invalidate the strategy you were using yesterday. And yet, there are four drill rigs turning on site. There’s very little time to stop and consider the next move.

Too often, companies in this environment behave like the clerks at the store. Any glitch or change in plans sends them into mental lock-down. We can’t possibly change. We don’t usually do that.

Seth Godin calls this “the lizard brain”. The most ancient part of our cerebral system. The one that’s optimized for survival alone. And the best way to survive is by not taking risks, not doing anything out of the ordinary that might expose us to failure. The lizard brain wants to maintain the status quo because it’s safe (even if it’s completely useless).

The lizard brain manifests in exploration all the time. When faced with challenging new information, an exploration team chooses to ignore it. They simply keep doing what they were doing. Continuing with the old model. Even though it’s obviously wrong now.

Adapting to incoming information during an exploration program is frightening to the lizard brain. A lot of the time, it’s unclear what the next move should be (except that there should be a next move, different from the last one). You have to try something, and by trying you might fail.

The interesting thing is, failing often isn’t that bad. At least, failing in small ways.

Like my experience at the electronics shop. We had to try a few printers before we found one that worked. But the trying was critical. If we hadn’t gone to the back in the first place looking, we wouldn’t have met Kevin, who suggested we go talk to Robo, who knew there was a computer in the corner.

Often, when you make an attempt (even a relatively wild one), it yields interesting new information. It may not be the result you expected. In fact, the outcome may have very little to do with your original working theory. But at least something new has emerged about the project. And that something new often leads you to the next step in the process, be it printing or finding a mine.

The trick is to know when a project still has enough legs it’s worth spending time, energy and money to keep the machine moving forward. Could you crack this deposit open with metallurgical testing? Engineering design? Coarse gold sampling analysis and Gy’s theory? Geophysics? Thin section work? Drilling at a different angle? In a different location?

At some point, options are exhausted and a project needs to be abandoned. But it’s critical to properly assess the “walk-away” point. Making sure you’ve done everything you could do. Most major deposits are worked by at least three different companies before the discovery is finally made. Meaning the first two groups gave up too soon.

Especially, it’s critical to make sure you’re not spending millions doing work you knew six months ago was the wrong approach, but were too scared to change. Know which part of your brain is running the program.

Here’s to squashing the lizard.

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Some of the buying that’s propelled gold lately is from investors who want to hold metal as currency. Having something tangible in your pocket provides insurance if another financial catastrophe descends on the world.

JP Morgan recognizes this demand. On Wednesday, JPM announced it will open its first precious metals storage vault in Asia.

The facility will be located in Singapore, near Changi Airport (just in case you want to grab your gold and fly). The stated goal is to provide precious metals storage for “corporate, institutional and retail” clients.

Some of the people using this facility will be investors from outside Asia, looking to geographically diversify their gold holdings. Many investors are leery of keeping all their gold in one basket, just in case governments get confiscatory.

Perhaps more interestingly, the new facility will allow local Asian investors to get more involved in owning physical metal. Recently, the Singapore Mercantile Exchange announced the launch of a physically-settled gold contract that will be delivered at the JP Morgan vault.

But will gold be the number one choice in Singapore? Asia has always been a little different when it comes to precious metals. Many Asians prefer platinum as “catastrophe insurance”.

Look at Japan. On the Tokyo Commodity Exchange (TOCOM), open interest in gold amounts to 3.5 million ounces. Or about 5% of the 60 million ounces in open interest seen on the NYMEX exchange in New York.

With platinum, Japan’s percentage of global trade is much higher. Open platinum interest on TOCOM is 840,000 ounces. This is 45% of the NYMEX open interest in platinum, which currently stands at 1.9 million ounces.

As options like the new JP Morgan Singapore vault come available to Asian investors, it will be interesting to see what metal they choose. If they follow the Japanese example, this could become an important new source of demand for both platinum and gold.

Here’s to the other precious metal.

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North American gas sold for around that level throughout most of the 1980s and 1990s. And plenty of producers made money during those times.

The reason was costs. Back in those days, it cost a lot less to drill and service a well, build pipelines, and maintain a field.

Here’s some example data from the Petroleum Services Association of Canada. In 1981, a 2,000 meter gas well in central Alberta cost $450,000 to drill and complete. By 2005, the same well more than doubled in cost to over $1 million.

Obviously, with higher costs producers need a better gas price in order to make money. And up until 2008, they were getting the prices they needed to turn a profit even in a high-cost services environment.

But since then, things have changed. Prices have fallen back. Not quite to $2, but sometimes close.

Normally, low prices should have an effect on costs. With profits falling, less companies would drill. And with reduced services demand, drilling costs would drop. Possibly to the point where producers could once again make money at lower gas prices, like they did in the eighties and nineties.

But that’s not happening these days. Recent data from the U.S. Bureau of Labor Statistics show that in October, U.S. drilling costs hit their highest level since April 2009.

Services prices did come down about 20% in the immediate wake of the financial crisis. But in 2010, they have been rising again. And the industry is still at very elevated cost levels compared to the beginning of the decade.

Part of the reason is oil prices have remained high. Leading to increased rig demand for oil-well drilling. Another reason is gas producers are still drilling in order to hold land in U.S. shale plays. There are anecdotal reports that frac costs in certain plays have tripled over the last few months.

High services costs and low gas prices are putting the squeeze on producers. Something has to give sooner or later.

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Specifically, how India’s need for thermal coal imports is going to tighten this market, both in terms of prices, and bids for coal deposits within shipping distance of Asia.

India simply doesn’t have enough coal. As of yesterday, one-third of the nation’s coal-fired power plants were running at “critical” levels of coal stocks (meaning less than seven days of supply). And 10% are at “super-critical”, with less than four days of stock.

I’ve been on this theme for about six months. And finally some of the signs of India’s “dash for coal” are starting to appear.

First, buy-outs of coal deposits. Last week, Canadian-listed coal developer CIC Energy received a $400 million takeover offer from a “multi-billion dollar Indian conglomerate”. CIC is moving forward the Mmambula coal field in southeastern Botswana (thanks for the heads-up, Saee).

India is even getting active in the junior side of the coal business. This week India’s Bhushan Steel announced its intent to buy a stake in Bowen Energy, an Australian coal explorer and developer with projects in the Bowen Basin.

Then there’s the signals from the coal market itself. This week, the chairman of the Indonesian Coal Mining Association told attendees at the Coaltrans Upgrading Coal Forum in Jakarta that India will pass Japan as Indonesia’s biggest coal export customer by 2011.

“In the past, India only bought high-quality coal, but now they started buying a lot of low-rank coal also because of an increase in domestic consumption,” chairman Bob Kamandanu said. He predicted India’s coal imports from Indonesia will rise to 70 million tonnes, up from 40 million tonnes this year.

In addition, Bloomberg reported this week that traders handling Richards Bay, the biggest export port for South African coal, believe rising demand from India could push coal prices at this locale to a two-year high.

The piece also quoted T.K. Chatterjee, procurement manager at Indian power major NTPC, as saying, “India will be importing in a big way… This will lead to an increase in prices.”

Signs, signs, everywhere signs.

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Today’s whipsaw action after the FOMC statement shook things up as it always does. We saw gold, silver, the dollar, SP500 and bond prices go haywire. It took about 30 minutes for the market to digest this news in that time a lot of people lost money because of the wide price swings. Trading around news, I find, is a net losing trade over the long run and I advise never to do it. Rather wait for a trend to form and trade any low risk setups that come your way.

I truly believe that the market has already priced in most news and events which unfold, and that news tends to agree with the overall trend of the market. Of course there will be short term blips on the charts from the news, but they tend to be minor setbacks in the underlying market trend. That being said, the trend is our friend, and while so many are trying to pick a top in the equities market it makes me cringe because they are fighting the trend and the Fed.

Successful trading is done by trading the trend, and during choppy times you may get roughed up a bit and need to alter your strategy for shorter term momentum play, but overall you gotta’ stick with the trend until proven wrong. Once the trend reverses and confirms, only then can you start shorting the market.

Last week we took another long position near the lows on the SP500 as it dipped down to key support with the market internals confirming our entry. This low risk setup gets us into a market at an extreme, meaning we are in the money usually within hours of entry and the market tends to keep well above our entry point until its ready for another surge higher or a break down.

I agree with those of you who think the market is WAY over bought and due for a strong pullback, and I find myself squirming in my chair when I take another long position way up here in the lofty SP500 prices. But over the years I have found that if it’s hard to pull the trigger, then it should be a good trade if all the trading rules have been met, and if it’s a clear chart setup (meaning an easy looking trade) you better watch out!

SPY – SP500 ETF Exchange Traded Fund

This chart shows two charts. One of the 10 minute intraday chart covering 6 trading sessions. It shows where we had our recent entry point and also shows how the stock market tries to buck traders off a bull market.

The bottom chart shows the daily chart and today strong reversal candle closing at a new multi month high. Again, the market is way over done and I never recommending chasing a stock, commodity or index, but to wait for a pullback to support before getting on the bull.

Mid-Week Trading Conclusion: In short, the market is still trending up so stick with the trend for now and DO NOT, for any reason, chase the market just because you want in. Wait for an intraday dip on the 30 minute chart if you’re dieing to get involved.

The average bull market lasts about two years and the Fed plans on pumping money into the market long enough to make this a 2 year bull market. I’m not saying we get higher prices for that long, but that’s more or less what plan for the guys manipulating the market up. So when it does fall there is plenty of room so hopefully the 2009 low is not broken which would not be good.

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Wednesday and Thursday’s rallies were on solid volume and the market internal indicators along with market breadth were strong also. There has been a large surge of new highs across the board on the NYSE, NASDAQ and AMEX. These numbers tell me that it’s not just one sector moving the market; instead it’s a broad market advance (institutional buying).

While I don’t typically try to pick major tops or bottoms because of the added risks and lower probability of winning trades, I do tend to spot them forming a few days in advance allowing me to tighten stops and take some profits on positions.

Trend reversals typically have large violent moves near the beginning and end of their life cycle making things not only tougher to trade but potentially more costly. Once I see a trend confirmed with moving averages, volume, and sentiment along with market breadth that’s when I start looking to take positions on pauses or pullbacks to support zones. This greatly increases the odds of winning/making money from the market. There are some really great Options Trading Strategies for taking advantage of these volatility changes in the market which you can get at OptionsTradingSignals.com

SPY Daily Chart: As you can see the market has clearly broken to the upside above key moving averages after finding support at the 50 day moving average. This rally has some solid volume behind it which I like to see also.

The first 3-4 days of a trend reversal generally post some give moves but after that initial thrust expect a pause or pullback to happen.

SPY 60 Minute Intraday Chart: We were lucky enough to take profits on our inverse SP500 trade as the market started to give us mixed signals of a possible rally. A couple days later on Nov 26th we saw a major shift within the market sentiment preventing us from shorting the market again.

Two days later the broad market gapped higher triggering protective stops/short covering sparking a fierce two day rally which took the market up to a major resistance level. I do feel as though the market is going higher, but right now, everything is WAY over bought and trading at resistance. Even if the market moves higher for another 2-3 days and breaks this resistance level, it will most likely have a pause, or pullback as it regains energy for another thrust higher.

Mid-Week Trading Conclusion: In short, it looks as though the trend is now up and the Christmas rally could be gearing up for a good one!

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For oil, there’s enough import-export capacity worldwide that global prices tend to align closely. In natgas, global markets are fragmented. Leading to disparate pricing in different regions. Just look at the comparison below, from PFC Energy.

One of the implications being: if you’re going to produce natural gas (or ship it as LNG), find the regions with the top prices.

Increasingly, it’s looking like this will be Asia. And specifically, southeast Asia.

By way of example, Vietnamese Deputy Minister of Industry and Trade Hoang Quoc Vuong said last Thursday that Vietnam will likely need to import over 800 billion cubic feet of gas annually by 2025 in order to meet demand.

The announcement came as part of the release of a World Bank report on Vietnamese gas sector development. In the work, the Bank estimates that Vietnam’s gas use will triple over the next 15 years.

The report also recommends that Vietnam move toward liberalized, competitive gas pricing in order to spur development of domestic gas resources. Exactly the kind of environment that will create opportunities for gas producers.

At the same time as gas demand is ramping up in nations like Vietnam and Thailand, the Asian super-powers are also hungry for supply. PetroChina said today that northern China (including Beijing) could face gas shortages of up to 300 million cubic feet per day this winter.

This is not a huge amount, relatively speaking. But it does underscore the point that Asian gas use is only growing, and supply (as well as transportation infrastructure) has lagged.

All the signs of a good gas market. I’m going back at the beginning of December to continue looking for projects that could capitalize.

Here is to the wide world of gas!

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