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  • ophelia342001 ophelia342001 Mar 10, 2006 3:32 PM Flag

    Something amiss here

    I have been in the oil field service sector much of my career and before that in the E&P sector. There is something strange going on here with the disconnect of NG to oil prices, usually it has been 6:1. With that ratio and current NG prices, it implies $40 oil or less. I just don't believe this.

    Any thoughts on this issue.

    ophelia

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    • nothing is amiss we just had a warm jan.ng is now cheap enough that the power producers are now switching over to ng when its cheap its prefered over other fuels cause its environmentally friendy.the industrial sector will use up the reserves shortly and in a few months you will be whistling dixie.REFINERYS ARE IN THERE TURN AROUND (shutdown mode) for winter/spring repairs when demand is low when they ramp up they will be using mass amounts of NG .I know because I worked in a Major oil refinery for years and had to take readings on the fuel being consumed by there massive furnaces.I KNOW WHAT I'M TALKING ABOUT,NOT JUST BLOWING SMOKE.

    • The oil trusts and tankers started breaking down months ago. I sold SJT and VLCCF long before the reasons showed up. The reasons were simple, high proces depressed demand, and producers couldn't curtail production quickly enough, hence the byuod in inventories. I don't see $40 oil, but prices could collapse in the event of a sudden further build in inventory. Bye Bye oil stocks if that happens.

      • 1 Reply to bluesbeat2
      • Agree- everyone gets that energy is a buy long term but short and intermediate factors suggest the risk of a breakdown- so part of whether one owns or wishes to own HELX needs to be counterpointed with the percentage of oil stocks already in one's portfolio. When everyone thinks that a stock or sector can't miss it is almost surely a sign that this euphoria has been priced into a stock and actually added risk to it. A lot of energy stocks- xec and cvx when last i looked- have great S&P ratings but it hasnt helped them. It still seems to me that HELX is not acting right even relative to its peers, and that it is just as likely to soon drive up the demand for xanax as it did for champagne post latest earnings.

    • The oil trusts and tankers started breaking down months ago. I sold SJT and VLCCF long before the reasons showed up. The reasons were simple, high proces depressed demand, and producers couldn't curtail production quickly enough, hence the byuod in inventories. I don't see $40 oil, but prices could collapse in the event of a sudden further build in inventory. Bye Bye oil stocks if that happens.

    • "ophelia", I have noticed the same 6:1 ratio disparity. I agree with "deep" regarding the temporary over supply in storage. This does create unusual pressures on current prices because of storage costs, tied up funds and future price uncertainty. The dumping of their excess then competes with current market. However, we still see $10+/NG and $60+/crude in near "futures" quotes. That still fit the 6:1 ratio equivalent. Also when looking at historical NG and Crude price data there has been periodic imbalances over the decades.

      The good news, NG is the "politically correct" fuel of choice for most consumers. In power generation and industry it will be how much "BTU for the Buck" that will rule unless plants are pressured to do otherwise.

      For decades in the past the fear of depleting NG reserves and delivery failures hampered the growth of NG markets. Most of these problems have been fixed. IMHO if NG reserves continue to increase significantly in the future there is room for an expanded NG market, but don't expect the market to be smooth.

      Old Watchdog

    • ophelia....NG is being shorted on the NYMEX due to demand weakness from the warm winter.

      Oil is price sensitive to things happening in the whole world, where NG can be run up or down in a given market for separate reasons. As electric producers see the low price of NG, they will be switching over from oil to use cheap NG.........and in a short while, they will sop up supply, driving NG back up within a few months. It may or may not get back to the historical 6/1 ratio.........but it won't stay this crazy for long.

      It does seem weird though.........




      deep

 
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