"Can someone explain to me why, if the draw is bigger than expeected, that Chesapeake's stock drop? Seems like this would be good news not a negative one."
The NG draw reported this week (for the week ended 1/15/10) was large and was also larger than expected. In addition, the NG remaining in storage is now consistent with the 5 year average for this time of year. All of this is essentially "old news", and perhaps somewhat priced into the market.
The weather forecasts for the next 2 weeks over much of the US are normal to above normal temperatures. This will decrease demand for NG compared to the prior 2 weeks.
Somehow, market participants around the world attempt to make sense of these and other longer term factors. Short term market movements are difficult to understand.
If demand for NG increases, CHK stock will follow. $5 to $6 NG is adequate for CHK to produce a solid profit if US demand is high and increasing.
The Pinkens Plan would be a significant boost to CHK. We should watch Washington to see if the Pickens Plan receives any support as a jobs program, now that health care is winding down and jobs are becoming more of a Washington focus.
Good post sooner.
Market often act in irrational ways. Today is a good example although CHK is hold up much better than others.
The issue is not week to week expecations but the slope of the storage decline curve. The huge draws we have hand has reduced excess supply in storage and even if we have "normal temps" for the rest of the winter supply should be down below the five year average of 1350 bcfe by the end of April. However longer forecast calls for a resumption of extreme cold in Feb which will cause supply to be below 1200 bcfe. If that happens spot will move a lot higher. People did not expect the severity of the storage declines and spot price will reflect that going forward.
How CHK reacts day to day is anyones guess but over the near term it should be higher. I think much higher for many reasons.
Sit back, relax and think before you panic.....this is a flushing out market that is consolidating.
Entire economy is still suffering from bad jobs number this morning, stock market is collapsing from BO's attack on free enterprise and profits (need to share the wealth with those who don't want to work). We will crash and burn if he and his cronies are not stifled quickly by impeachment or other legal means.
C'mon, there are tangibles in play here. The drawdown numbers were good. However, look at the overall market right now. There seems to be a possible correction taking place.
And as I type, we've just turned green.
Prior week draw number was obviously manipulted to the low side to avoid news of "record draw" which might have been bullish. Hedge funds arranged for two weeks to be averated. It was much warmer last week than two weeks ago. Unless industrial use picked up dramatically last week, there is only manipulation to blame.
That's what I assumed (market conditions) but although I like nat gas as a play, I am not an expert in the underlying nuances. If cold weather + drawdown on gas storage is seen as a negative then I really needed to educate myself on what moves the sector. Thanks
On the short term, the market typically operates on expectations, and "buy the rumor / sell the fact". Just because an actual draw may have come in larger than consensus expectations, that does not mean that people trading CHK agreed, as they may have thought differently and traded on those expectations.
Short term market moves are also affected by human mass psychology, which is almost always impossible to quantify and predict. Today, the market is dropping a lot, and for the second day in a row. I suspect the trading mentality is that we might be in short term correction, and it is better either to not buy, or to sell and take profits, and then get back in when one thinks the market is leveling off.