MDCigan

A Compelling Energy Ratio

"Given that cooler weather will begin to make itself felt in the weeks to come, the prognosis for natural gas looks promising."

Not sure what you mean or are implying here, but cooler weather is most certainly NOT bullish for NG.

*EXTREME* temperatures, either extreme heat or extreme cold are bullish for NG, because that results in either substantially increased air conditioning which increases usage of NG generated electrictity, or increased NG usage for heating. The *WORST* possible situation is middle of the road temperatures (slightly warm or cool) because then you have NEITHER air conditioning nor heating, and thus NG usage drops off considerably.

I'd be careful with using this ratio at this time, because there may be some strong bearish factors for NG at play. One could be that crude oil prices continue to drop substantially if global demand is weakening, and secondly there is a ton of domestic production presently. Look at the last month or so of actual storage numbers versus estimates. Not bullish.

I'm long some NG producers (CHK and XTO) but definitely concerned about downside at the present. Buying UNG here might be risky. 4-6 might very well be in the cards.