The Oil Desk
- Thread starter TradinMadMan
- Start date
give me a -10m lolcrude oil short / nat. gas LONG pair trade
based on this chart, the above pair trade will be profile for long term ( 3 to 6 months )
http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined
here is url if above did not show chart
http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined
based on this chart, the above pair trade will be profile for long term ( 3 to 6 months )
http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined
here is url if above did not show chart
http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined
Investing in Natural Gas: It's Time
http://seekingalpha.com/article/157691-investing-in-natural-gas-it-s-time?source=article_sb_popular
If you believe that all markets return to the norm over time, this chart should give you some idea of the extreme conditions that now exist in the cost of energy from these two sources. The historical ratio looks to be about 8 to 1; we are now sitting at 21 to 1. When a market gets this far out of the normal range, the likely result is a snap back to the historical relationship. Many times the momentum will overshoot the target. I would rather be long natural gas, at these prices, than crude oil.
According to Baker Hughes (BHI), a drilling company, there are 688 rigs drilling for natural gas in the U.S. That is 56% less than a year ago. This is the future we face: natural gas is abundant, but we are not replacing the reserves to meet our future needs.
Two other points need to be made concerning natural gas. Reports are that natural gas short interest is running 2 to 1 against long positions. There is no fuel for a rally like short covering! On Friday, rumors circulated that a major hedge fund had taken a huge long position in natural gas.
Our recommendation is to get long FSYS and/or UNG, I like the odds on both of these. One is an investment the other is a trade. Either could make you 50% or more in the next six months.
http://seekingalpha.com/article/157691-investing-in-natural-gas-it-s-time?source=article_sb_popular
If you believe that all markets return to the norm over time, this chart should give you some idea of the extreme conditions that now exist in the cost of energy from these two sources. The historical ratio looks to be about 8 to 1; we are now sitting at 21 to 1. When a market gets this far out of the normal range, the likely result is a snap back to the historical relationship. Many times the momentum will overshoot the target. I would rather be long natural gas, at these prices, than crude oil.
According to Baker Hughes (BHI), a drilling company, there are 688 rigs drilling for natural gas in the U.S. That is 56% less than a year ago. This is the future we face: natural gas is abundant, but we are not replacing the reserves to meet our future needs.
Two other points need to be made concerning natural gas. Reports are that natural gas short interest is running 2 to 1 against long positions. There is no fuel for a rally like short covering! On Friday, rumors circulated that a major hedge fund had taken a huge long position in natural gas.
Our recommendation is to get long FSYS and/or UNG, I like the odds on both of these. One is an investment the other is a trade. Either could make you 50% or more in the next six months.
Oil and Natural Gas: Ratio Explodes in 2009
http://seekingalpha.com/article/158323-oil-and-natural-gas-ratio-explodes-in-2009
Theoretically, based on an energy equivalent basis, crude oil and natural gas prices should have a 6 to 1 ratio. However, due to various market characteristics, the price of oil has been following a pattern of 8-12X that of natural gas since 2006. Now, with oil spiking to its highest level this year and natural gas plummeting to a 7-Year low to below $3/mmbtu, the current ratio of WTI/Henry Hub price is close to 25 to 1, a historical high
Ratio Tightening to Come from Oil
The total divergence between oil and natural gas prices, which is reflected by the unprecedented 25 to 1 ratio is unsustainable based on the factors discussed here. We should expect the ratio to narrow with most of the tightening likely coming from the retracement of oil prices to the downside. While it is difficult to expect a 10 to 1 ratio, some tightening towards 15 to 1 level could be in the cards by next year, depending on the pace of the global economic recovery.
Investment Strategy
For long-term investors, now is a good time to add some natural gas related holdings. However, since most of the commodities ETFs, in addition to market risks, will likely face the regulatory overhaul as discussed in âNatural Gas ETF Suspends New Shares: Are There Alternatives?â, a better strategy would be to invest in the natural gas E&P equities as well as ETFs.
Here are some ideas: Natural gas and LNG producers with international operations such as Apache Corp. (APA), Anadarko Petroleum Corp. (APC), ExxonMobil (XOM) and Chevron Corp (CVX) are all solid companies worthy of a seat in any portfolio. And iShares Dow Jones US Oil & Gas Exp. (IEO), and iShares S&P Global Energy Sector Index Fund (IXC) are two good examples for your ETF considerations.
http://seekingalpha.com/article/158323-oil-and-natural-gas-ratio-explodes-in-2009
Theoretically, based on an energy equivalent basis, crude oil and natural gas prices should have a 6 to 1 ratio. However, due to various market characteristics, the price of oil has been following a pattern of 8-12X that of natural gas since 2006. Now, with oil spiking to its highest level this year and natural gas plummeting to a 7-Year low to below $3/mmbtu, the current ratio of WTI/Henry Hub price is close to 25 to 1, a historical high
Ratio Tightening to Come from Oil
The total divergence between oil and natural gas prices, which is reflected by the unprecedented 25 to 1 ratio is unsustainable based on the factors discussed here. We should expect the ratio to narrow with most of the tightening likely coming from the retracement of oil prices to the downside. While it is difficult to expect a 10 to 1 ratio, some tightening towards 15 to 1 level could be in the cards by next year, depending on the pace of the global economic recovery.
Investment Strategy
For long-term investors, now is a good time to add some natural gas related holdings. However, since most of the commodities ETFs, in addition to market risks, will likely face the regulatory overhaul as discussed in âNatural Gas ETF Suspends New Shares: Are There Alternatives?â, a better strategy would be to invest in the natural gas E&P equities as well as ETFs.
Here are some ideas: Natural gas and LNG producers with international operations such as Apache Corp. (APA), Anadarko Petroleum Corp. (APC), ExxonMobil (XOM) and Chevron Corp (CVX) are all solid companies worthy of a seat in any portfolio. And iShares Dow Jones US Oil & Gas Exp. (IEO), and iShares S&P Global Energy Sector Index Fund (IXC) are two good examples for your ETF considerations.
Thanks Investvision. Nice read.
"U.S. crude inventories likely fell 400,000 barrels last
week, a preliminary Reuters poll of analysts showed ahead of
weekly supply data. The poll showed that analysts think
gasoline stocks declined and distillate supplies rose."
Bloomberg estimates:
crude -500,000
gas -1.05 million
distillates -675,000
week, a preliminary Reuters poll of analysts showed ahead of
weekly supply data. The poll showed that analysts think
gasoline stocks declined and distillate supplies rose."
Bloomberg estimates:
crude -500,000
gas -1.05 million
distillates -675,000
When (month) does U.S. distillate demand usually increase?