While oil and natural gas have both seen sharp drops since early July, the declines in gas have been twice as severe. Since its high in early July, natural gas has declined by 33%, while oil has declined by a more modest 16.2%. As a result, the ratio between the prices of oil and natural gas has risen back near its highs of recent years. Based on their relationship since 1990, the average ratio between the two commodities has been 9.2, which is 33% below current levels. While the two commodities are not completely fungible, this would imply that either oil still has further to fall or else the sell-off in natural gas has been overdone.
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