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TFC Commodity Trading Forum

Re: Tropical update/CeeJay
In Response To: Tropical update *PIC* ()

Hi CeeJay,

Maybe things will get interesting yet !! Possible landfall not too far from Houston (about 1/4 inch NE) on your map if I remember right ??

Keep chugging, and don't take anything that I say as being "negative" toward what you are doing. I only try to lay everything I see, learn, suspect against the price chart as things evolve. If the Ng market decides to pop out of this trading range, it will become obvious. Meanwhile there is money to be made if one can get a better handle on the "excursions within the range".

I look at 4.2 to 4.7 as the nominal trading range. If/When it scoots out of that, I would look for something to possibly happen. You can look at the chart and see what I mean.
I had a great conversation the other day, and I'm intentionally leaving out names. Large South Eastern Power Generation company with a wide cross section of plant/fuel types.

I had hoped to learn a bit more on how they contract for their Ng, but much is considered company privatate. Some facts did come out and maybe next time I will be better "armed" with my questions .....
In this case:
The Nuclear plants are run at 100% whenever possible, more cost effective as you would expect, and in this case dropping back 5 - 15% serves no useful purpose in allowing room for conventional plants (load followers/peakers) to operate.

It was allowed that this may not be the case in all areas, but here it was/has been for 20 years.
On Ng Vs. Coal:
Over the last year, with Ng in current range, the leaning has been toward Ng. First toward the "Newer Combined Cycle" plants which are much more efficient to start with, but current Ng prices are at a point where they are backing off on the Coal fired plants first. The relative fuel costs are pretty close at the moment.

It was not "clearly stated" but the shale gas was mentioned and new plant construction leans toward/or is Ng.
I tried to learn more on just how they procure/contract for their gas, but likely did not ask the "right questions/right order" ??

In summary on that:
Forward contracting was mentioned, but could not "extract mention of futures contracts".

Delivery is via "direct pipeline" connections, with some "local storage (no clue how much? days/week?) It was clearly stated that the cost was the "transportation + commodity cost" but I could not extract what the "commodity cost" was based on.

Whether it was an agreement with a producer, a storage facility, a pipeline company (likely tied to a storage facility), I could not ascertain.

But anyway, things can get more interesting !!!

There are about 450,000 producing wells in the US. How many producing companies are there ?? How many sell futures contracts, they go way out !! ??? Who fills the "delivery obligation" when a contract expires ???

There is a lot of "plumbing" that bypasses storage sites so there must be a lot of "present day production" that is filling "older futures contract obligations as they expire" So, this is "another circus" to delve into ...

An interesting market/industry !!!!