Is it time to short oil and go long natural gas? I posed the question a few days ago and have done a little more digging. The ratio of oil/natural gas prices is reaching extreme historical levels (currently 19.40). Much has been written about recently about the under performance of natural gas relative to other commodities. Tom Lydon notes the ratio is reaching extremes. The chart below from CXOAG shows the ratio dating back to 1976-2008. Note that today we are at a ratio of 19.4
Now take a look at the 3 year chart:
Bespoke notes that the trading volume in UNG has increased dramatically since March, despite the price of natural gas remaining in the doldrums.
Putting all of this in historical context, one has to wonder how much more upside this ratio has...