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A hidden parabola? - Ratio of Crude to NatGas is 43.4 and rising

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This is the ratio of Crude Oil to Natural Gas (Using Dow Jones sub-Indexes) - 2 year chart;

OilGasratio.png

 

I've only just found this and it looks like a parabola to me, my impression is that it's more likely to point to a forthcoming low in Natural Gas than a high in Crude Oil but whilst the equity markets are making new highs, Crude Oil is not.

 

You have to go back to 2002 to find a point when Natural Gas was cheaper, it's almost closed at the low of the decade today.

 

NAtural Gas - 2002 to present;

 

NatGas2002topresent.png

 

The indicator in grey beneath the chart is the Disparity Index, spikes to the top of the range can point to highs, spikes to the bottom, lows.

 

ScreenShot2011-11-04at064443.png

 

 

 

Sentiment for Natural Gas is extremely low;

 

Chart fromwww.sentimentrader.com

NGSentiment.png

 

 

The price can only go so low, it would be interesting to know the average cost to extract it from the ground.

 

Is Natural Gas going to hit a low very soon?

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Hmm, maybe I will get back into the double-levered gas ETC in the end? I think I had lost 25% on it before I got out! :lol:

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Those products are loaded with issues, have you thought about a long term position in the futures?

 

The main contract value is $23,050 right now however the miNY Natural Gas futures contract is $5762.50....

 

The margin for the miNY contract with my broker (Mirus Futures) is $709 per contract, and it's cash settlement, no delivery.

 

(PS the sub-heading to this topic should read "May help determine a tradeable low in Natural Gas", if someone wouldn't mind amending it - thanks)

 

 

Natural Gas seems to be doing a bit of a May 2011 Silver style dive right now. Down nearly 25% this year.

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An alternative would be a (quasi-)exponential payoff constructed with calls. Like my oil hedge back in the days.

 

Here is the payout profile of a <b>strategy</b> where $1,000 are piled into each of the denoted <b>six call options</b> (strikes: $90, $110, $130, $150, $200, $300). <b>Total investment: $6,000</b> at today's prices (as seen on Societe Generale's web page). So, if oil reaches $500 by Nov 2016, these $6,000 could have made $380,000.

 

<b>Maximum loss: $6,000.</b>

 

<b>Breakeven: $140 oil in Nov 2016.</b>

 

Trade of the century?

...

oilcallstrategy.png

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The price can only go so low, it would be interesting to know the average cost to extract it from the ground.

Is Natural Gas going to hit a low very soon?

Like many others (too many others?) I think the vast supply will remain a problem for a long time,

while access to the to crude supply may depend on politics and the US dollar

 

Gas-to-oil technology may be an interesting investment, given the high ratio

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Gas-to-oil technology may be an interesting investment, given the high ratio

Yes. I hold Carbon Sciences as a (lottery?) ticket on that.

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Yes. I hold Carbon Sciences as a (lottery?) ticket on that.

 

Just had a glance at the chart - boy have they had a mauling. One to research this weekend..

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Just had a glance at the chart - boy have they had a mauling. One to research this weekend..

Yepp, and I bought before the mauling.

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Mild winter effect?

 

More vehicles on the road than normal in a mild winter so oil usage above average while less gas used for heating resulting in oversupply of gas.

 

 

Natural gas futures slumped to a 10-year low, as warm winter weather dampens demand and pressures prices that are already falling on record supplies.

 

“This is a classic case of oversupply,” said Daniel Yergin, chairman of IHS CERA. Natural gas on the Nymex [NGCV1 2.333 0.011 (+0.47%) ] fell 6.8 percent Tuesday, finishing the day at $2.4880 per million BTUs, its lowest settle since March, 2002.

 

“We’re behind on degree days. It’s been above normal in terms of the temperature, and that has just collided with a record amount of supply being produced and in storage. We’re going to end the season with a record amount of gas in storage, yet again,” said John Kilduff of Again Capital.

 

Kilduff said the storage estimates for the winter season’s end, March 31, range from about 2 to 2.4 trillion cubic feet, well above the average 1.5 trillion cubic feet.

 

http://www.cnbc.com/id/46056521

 

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Like many others (too many others?) I think the vast supply will remain a problem for a long time,

while access to the to crude supply may depend on politics and the US dollar

 

Gas-to-oil technology may be an interesting investment, given the high ratio

 

Were you not involved in the energy markets in a previous incarnation Bubb? Is there much scope for Gas to pull demand away from Crude at these levels, or would that take some time to develop?

 

 

http://www.zerohedge...t-dont-frack-me

 

" According to the United States Geological Survey, the Marcellus Shale alone is home to 84 trillion cubic feet (TCF) of technically recoverable natural gas. Estimates of the amount of recoverable gas contained in all of America's shale basins range as high as 3,000 TCF."

 

 

That's a lot of fracking gas.

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T. Boone Pickens today predicted a 1-handle on natty.

 

At extremes, extremes are predicted, $1 seems extreme when you consider the % decline from where we are. NatGas closed at 2.343 today. $1 is a 57% decline from where we are.

 

Over my years looking at prices the negative correlation between NatGas and stocks hasn't escaped my attention;

 

 

SPYNG.png

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At extremes, extremes are predicted, $1 seems extreme when you consider the % decline from where we are. NatGas closed at 2.343 today. $1 is a 57% decline from where we are.

 

Over my years looking at prices the negative correlation between NatGas and stocks hasn't escaped my attention;

 

 

SPYNG.png

Yes. Of course by a 1-handle we mean that natty will be $1.xx , it could be 1.99, or lower.

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Shift to energy ?

 

In the past, SPY peaked out when NG was making a flat bottom

 

spyng.png

 

Is this just a matter of: Lower energy prices helping the economy and stocks?

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Is this why?

U.S. Cuts Estimate for Marcellus Shale Gas Reserves by 66%

 

By Christine Buurma - Jan 23, 2012 9:04 AM PT

 

The U.S. Energy Department cut its estimate for natural gas reserves in the Marcellus shale formation by 66 percent, citing improved data on drilling and production.

About 141 trillion cubic feet of gas can be recovered from the Marcellus shale using current technology, down from the previous estimate of 410 trillion, the department said today in its Annual Energy Outlook. About 482 trillion cubic feet can be produced from shale basins across the U.S., down 42 percent from 827 trillion in last year’s outlook.

===

 

-66%, that's a big number

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What looks like a good write-up on natty here:

 

http://moneymorning.com/2012/01/16/2012-natural-gas-price-forecast-why-to-avoid-widow-maker/

 

He suggests that the US will remain saturated in natural gas at least until 2013 and maybe till 2014/15 when the export of LNG begins in earnest (along with the Panama Canal work reaching completion).

 

He also suggests the oil:nat gas ratio could reach infinity in some American markets.

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He also suggests the oil:nat gas ratio could reach infinity in some American markets.

Carbon Sciences should be able to make some money in this case.

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This is the ratio of Crude Oil to Natural Gas (Using Dow Jones sub-Indexes) - 2 year chart;

OilGasratio.png

 

 

 

Here's what happened next to this ratio;

 

Parabola.png

 

 

The day I posted the ratio chart was in fact one day before the top in the parabola.

 

 

Natural Gas futures - 2010 to present

NGpresent.png

 

Substantial increase in volume.

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TFNN's

Tom Obrien and Larry Pesevento are now getting Bullish on Natgas

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T. Boone Pickens today predicted a 1-handle on natty.

 

Devon CEO, John Richels, today also predicted a 1-handle on natty (this summer) on MadMoney with Cramer.

 

DVN is one of my favorite companies.I've sometime thought that if I could only buy one stock this may be it.

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But is Nat Gas a buy yet ?

 

Iv been looking at Buying a nat Gas ETF. Iv been reading quite a bit about Nat Gas Over the last few 2 months. And iv found out that lots of people have been burnt by it (no pun :D )

 

Includeing Buffet !

 

Its seems someone calls the bottem And then it goes down even more !

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