Oil Versus Natural Gas

This is really a follow up to Roger Nusbaum’s piece on the oil sands ETF. I mentioned this ETF, albeit briefly, here. I know: home field advantage as the Claymore guys here in Toronto are only a 5 minute drive away from my office.

By the way, the weighting of underlying positions in this ETF is based on three factors:

1. Current production in barrels per day

2. Production expected in 2015

3. % of total production actually in Canadian oil sands

When I first heard of Claymore and the oil sands ETF, I thought they would have launched it by mid-late summer. I just spoke with the prez of Claymore Investments and he says this fund should be out by the end of October or first week of November. Oh that's some good timing.

But here’s the point, or rather question, in this blog entry:

Personally, I still like oil and have not dumped our energy ETF positions although for private client accounts they are somewhere at around 4-8% of the overall portfolio. However, although I like oil, I'm not so sure about natural gas.

To me, one is a global commodity play that has some geopolitics as well as obvious emerging market stimulus. The other is a regional weather play. I won’t get into El Nino or the supply/demand imbalance for natural gas.

Bottom line: Long oil and short natural gas may be in play for roughly six months. Futures is easiest to implement, but I wonder is there a way to play natural gas in the ETF or CEF space?

Aside: I often write more on SeekingAlpha ETF topics rather than energy, so my apologies if this oil/gas discussion is a replay.

Comment on this article

Comments

[Roger Nusbaum:]

Richard, thanks for the info you dug up.

It looks like you are quoting me on the 4-8% number, the el nino stuff ETC? Or are those your comments. To be clear those are not comments I ever made anywhere. Either I am unclear on your meaning because of the "<em>But here’s the point, or rather question, in this blog entry:</em> are those are your comments (which are sleint points, not taking a shot at you just making a correction of sorts) or you are quoting someone else?

FYI, thank you.

2006 Oct 08 09:31 AM

[Roger Nusbaum:]

um that word was supposed to be salient:-)

2006 Oct 08 09:32 AM

[Richard Kang1:]

Hey Roger. When I say "But here’s the point, or rather question, in this blog entry" I'm talking about the purpose/point/question... that I wish to put forward in this blog titled "Oil versus natural gas". I am not quoting you or anyone else on this. Sorry for the confusion.

So I'm talking about my firm and my firm's clients when I refer to having not sold energy positions and that they're in fact somewhere around 4-8% of portfolio currently.

So that's that. Getting back to the real question now. What's tricky with the oil sands play, and as good as it is in terms of a nice long-term strategic position, I just can't get around the fact that in the short term (I say roughly six months but energy specialists I talk to differ in their opinions regarding time frame) natural gas may not move in the same direction as oil. The oil sands play consists of companies exposed to both oil and gas. So one way around this is to simply be long oil futures and short gas futures. Is there another way to play this? Of course you can buy &amp; short a small handful of companies that focus on oil/gas respectively. But anything cleaner and simpler that can be done for this? These are the question that I can't seem to get around.

SeekingAlpha energy contributors: What about this?

Thanks.

2006 Oct 09 05:48 PM