With oil rallying and natural gas continuing to plummet on a daily basis, the ratio of oil to natural gas is at its highest level since at least 1990 at 26.35. When the line is increasing in the chart below, oil is outperforming natural gas, and as shown, it has been doing that now since the end of 2008. The ratio is currently in uncharted territory, so who knows when we'll see some reversion to the mean.
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What makes you think there will be a reversion to the mean rather than a mean tracking to the new ratio?
Seriously, IMHO this is nothing more than a lame attempt to pump petroleum prices. "In process" liquids are so out of whack it isn't an investment opportunity anymore but has become a supply chain disruption issue.
Posted by: Rob Dawg | August 25, 2009 at 02:47 PM
I think its a good time to play this Ratio.
I wrote about that trade and the way to do it a few days ago on the Oil Trader`s Blog.
http://oiltradersblog.blogspot.com/2009/08/natural-gas-oil-ratio-hits-19-years.html
Posted by: Henrique Simoes | August 25, 2009 at 08:01 PM
I have a lot of natural gas and would love to think of this as an aberriation where the ratio naturally narrows. But the same seems to have happened to gold and silver a few years ago. Gold trades at a much higher ratio with silver these days. A lot of money has been lost by those betting on a correction over the long run. A long run, indeed.
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