Natural Gas and Crude Part Ways

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Natural Gas and Crude Part Ways

Source: wsj.com��(8/27/08)

In the U.S., natural-gas futures trade at the steepest discount to crude oil in the past 18 years, according to CIBC World Markets. Crude closed Tuesday at $116.27 a barrel, or $20.05 per million BTUs on an energy-equivalent basis, while gas settled at $8.278 per million BTUs, or 41% of the price of oil.

By several measures, natural gas looks awfully cheap compared with crude oil.

In the U.S., natural-gas futures trade at the steepest discount to crude oil in the past 18 years, according to CIBC World Markets. Crude closed Tuesday at $116.27 a barrel, or $20.05 per million BTUs on an energy-equivalent basis, while gas settled at $8.278 per million BTUs, or 41% of the price of oil.

With storage levels only slightly above a five-year average, "gas should be typically trading at the 60-70% level," said James Williams, an energy economist at WTRG Economics...

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