TSCI Street Pulse - February 22, 2010
Oil vs Natural Gas
It has been more than six months since we last looked at our graph that tracks the price of crude oil versus that of natural gas. We started our weekly tracking in May 2007 and, since then, the average ratio over this time has been, oil:gas, 13.82:1. Since the March 2009 market lows, the average ratio has been 17.97:1. The ratio currently (February 19, 2010) is 15.65:1.
The ratio has exhibited extreme volatility since we last looked at the chart. On July 27, 2009, the ratio was 19.78:1. It rose to 28.87:1 at August 29, declined to 16.92:1 on October 24 before rocketing to 30.42:1 on November 14, only to collapse yet again to a low of 12.50:1 on December 19.
With the price of oil now hovering just under US$80.00/bbl, using the average ratio of 13.82:1, the equivalent price of natural gas would be US$5.79/mmbtu. But, if the ratio since March 2009 is used, the equiavalent price would be US$4.44/mmbtu. It is currently (February 19) US$5.10/mmbtu. Since this is not the usual seasonal period of strength for natural gas, we see better upside for oil right now than for natural gas.
Equity Research Available at: eResearch
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Bob Weir, B. Comm, B.Sc., CFA. - eResearch
Mr. Weir has 43 years of investment research and analytical
experience in both the equity and fixed-income sectors, and in the
commercial real estate industry. He was at Dominion Bond Rating Service
(DBRS) from 1994 to 2001, latterly as Executive Vice-President
responsible for supervising the firm’s 34 analysts and conducting the
day-to-day management affairs of the company. He joined eResearch in
2004 and has been its President, CEO, and Managing Director, Research
Services since May 2005.
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