Natural Gas Continues to Head Lower

While oil has recently made a nice bounce off of its lows, natural gas has continued to fall sharply, and it is currently trading at $4.49 per million BTU.

Below we highlight a short-term and long-term chart of natural gas. As shown, it is currently trading well below its 50-day moving average, and it is getting close to the bottom of its downtrend. The longer-term chart going back to 1990 shows that natural gas has a lot of support just above the $4 level, so that price will most likely act as a floor this time as well.

During the downturn in commodities last year, natural gas held up much better than the price of oil. In recent weeks, however, the oil/natural gas ratio has begun to rise again, indicating outperformance by oil. The ratio has basically traded in a range from 5 to 15 over the past two decades, and it is currently right in the middle at 10.

Comments

[Rocknbob:]

Or to rephrase your title:
And/or Oil Will Grind Higher..
Ratios tell us nothing concrete about absolute values.

Jan 26 12:39 PM

[elipsemaster:]

You say it is getting near the bottom of its downtrend. How do you know this?
With the shale plays producing so much gas, the economy sputtering, many of the nat gas drillers over leveraged forcing them to continue drilling even though it makes no sense for them to do so because of debt service, how can you predict the bottom? What's to stop gas from going to 3?
All we know for certain is the trend. And the trend is down.

Jan 26 04:49 PM

[tunaman4u2:]

Hard to believe Nat Gas will stay below 4 bucks for any extended time. The inventory report last week wasn't that bad.... but then again the oil build was very bearish & oil ran up pretty good. Its just hard to put any fundamental logic to anything right now.

Jan 26 06:26 PM

[X-15:]

Natural gas companies got slammed in Oct, then again in November and December. Oil and Natural gas -use is limited to heat,power, and transportation. Won't be having much of that in the future. Haven't you heard the world is nearing its' end.

Jan 26 08:59 PM

[FVG007:]

I am sure Natural Gas is going to move up very soon...Load it up!

Jan 27 12:11 AM

[Steve Ward:]

NG still has too much production capacity. NG gets a boost if Obama Admin starts a carbon credit trading regime.

Jan 27 08:28 AM