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United States Natural Gas Message Board

  • goldinvestmentmanagement goldinvestmentmanagement Aug 28, 2009 6:18 AM Flag

    Record Oil-Gas Price Ratio May Be Set to Narrow

    Record Oil-Gas Price Ratio May Be Set to Narrow

    Aug. 25 (Bloomberg) -- Crude oil has become so expensive
    compared with natural gas that the record price ratio between
    them probably won’t last, analysts say.
    The CHART OF THE DAY shows the prices of these commodities
    since 1990, when natural-gas futures started trading on the New
    York Mercantile Exchange, in the top panel. The ratio between
    them, which closed at a record 26.4-to-1 last week, appears in
    the bottom panel.
    The ratio has more than tripled this year amid a 67 percent
    increase in crude prices, bolstered by speculation that Chinese
    demand will climb. Gas prices have fallen 48 percent on reduced
    demand from industrial companies and the start of production at
    new U.S. fields.
    “History clearly suggests that the price gap will
    eventually narrow, through some combination of oil prices
    falling and natural-gas prices rising,” Donald Marron, a former
    member of the Council of Economic Advisers, wrote in an Aug. 21
    posting on his blog.
    The timing of any return to historical norms, also known as
    mean reversion, is questionable. Marron didn’t speculate in his
    posting about when that might take place.
    “Who knows when we’ll see some reversion to the mean,”
    analysts at Bespoke Investment Group wrote yesterday in a
    comment highlighting the oil-gas ratio.

 
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