Wednesday, June 10, 2009

Oil to Natural Gas Ratio at Historic Extreme Levels

The oil to natural gas ratio is at an extreme level not seen in at least 15 years, reports market technician Martin Goldberg. Martin is an astute market observer who I recently discovered on the Financial Sense Newshour.

With oil above $71, and natural gas below $4, you'd think that something has to give. Sure, we may be swimming at natural gas, but we also know that the cure for low prices is low prices. There's not much downside to natural gas at these prices, just a hair above its cost of production.

If you're interested in playing a pair trade, you could go long UNG, and short...isn't their an equivalent for oil? My friend and I were perusing ETF's for oil last week, and he wasn't able to find anything that wasn't double leveraged. Any suggestions?


Dennis Mangan said...


Brett Owens said...

Thanks Dennis!

Dennis Mangan said...

Hey, Brett, you're welcome! I hope that I've mentioned that I find your blog well worth reading. Your worldview seems pretty close to mine too.

Brett Owens said...

Thank you Dennis, really appreciate it.

Great minds must think alike, haha - great to connect with another like-minded person, thx for commenting and reading...

Anonymous said...

Brett I agree and looking at going very long natural gas through Horizon Bet Pro's ETF HNU Natural Gas Bull. I have one question.

I am 100% confident that natural gas will go up in value long term but if it trades sideways for a long time is there any risk in holding an ETF for extended periods other than cost of capital and small MER charges on the ETF?


Walter Kurtz said...

Oil prices are not going back to the levels of last summer. The prices are capped. The latest numbers from Credit Suisse show why. The financial crisis has created permanent destruction of demand growth. The expectation now is 1% growth in demand per year. Two contributors to this are:

1. Faster gasification in Asia (as Asian nations begin to use liquefied natural gas)
2. Greater auto efficiency in the US. Sensitivity to high gas prices is extreme, given all the pain the US consumers have experienced. Fuel efficiency is here to stay.

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