In February there were concerns that storage space around Cushing would run out because there was literally nowhere left to put the oil — demand had fallen off a cliff. Given the stockpile figures that are coming out and all the supply that’s been stored and sold forward to capture the “reflation”-driven price contango, I’d say we’re gearing up for a spectacular repeat performance.

I believe that eventually Natural Gas will head higher … from what level, that is the unknown but there are are a lot of smart rich people looking at UNG get ready to buy … Also, it depends on the kind of winter we may get …

Oil moved up until it didn’t. Then it collapsed. Another way of looking at it was that Nat Gas was correct in 2007, and was only dragged up by the same time of frenzied speculation that is driving the market now. Using the logic you quote, you could’ve justified buying oil at $149/barrel (UNG turning around and going up is a testament that Oil’s advance is correct).

Instead of looking at relative relationships, I think it’s more correct to look at what drives prices. Inflation aside, prices are a function of supply and demand. Are you saying demand is going to outstrip supply? If so, then yes, prices will most definately go higher until an equillibrium betweent the two is reached.

“August 14, 2009

He said, she said. Two people disagree, with no other eyewitnesses, and then how do we tell who is right?

There is a normal and understandable relationship between the price movements of natural gas and crude oil. Each commodity is found underground, and thus has similar costs profiles for finding it and extracting it. And each is economically sensitive, with demand rising and falling in sympathy with economic activity. More recently, with the advent of commodity index fund management gaining popularity in hedge funds, the investment properties of each are getting more alike than they were previously and thus the price correlation has increased.

Oil prices bottomed in December 2008, and have almost doubled since then as prices have recovered from the crash selloff. But natural gas prices have fallen even further, breaking the correlation in terms of the big picture, but still making minor up and down movements in sympathy with crude oil prices. So if the two are actually related to each other, the question becomes: Who’s right, natural gas or oil?

Seeing disagreements like this is not new. Back in 2007, there were a couple of notable divergences when natural gas prices turned down but oil prices made higher highs. Oil turned out to be correct about the direction for both commodities in those two cases. And in late 2008, natural gas prices made a brief attempt to move up, making a higher low. But oil prices kept on heading down, eventually proving right that both oil and gas were headed lower.

Now we see oil making higher prices as natural gas prices are retesting the lows just above $3. Who’s right? If history is our guide, then oil ought to turn out to be the expert about where both are heading.”

http://www.mcoscillator.com/learning_center/weekly_chart/gas_versus_oil_whos_right/

Sprott just published a report called Gold… The ultimate AAA asset.

http://www.sprott.com/Docs/Reports/tripleA_Asset.pdf