The Widow Maker

What energy crisis?  And why doesn’t our electricity bill come down with the price of natural gas?

The BTU equivalent price of a barrel of crude oil relative to natural gas is now around $16.60 versus the $100 where crude oil trades today.  That is one heck of an arb and will be the “Next Big Thing” if the discrepancy lasts.   Nattie has to be a buy in here.

(click here if chart is not observable)

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8 Responses to The Widow Maker

  1. vbounded says:

    Timing is everything.

  2. Pingback: Monday links: safer finance | Abnormal Returns

  3. Tiho says:

    Other than timing, how are you going to buy Nat Gas?

    Are you going to pay 20% or 30% premium on long dated futures which are in huge contango?

  4. J says:

    Why not look at GAZ, the ETN of DJUBS NG index? Is it because its tough to hedge, disadvantages (much like futures since the index is based on Henry Hub) due to roll, storage costs etc. or just too small/illiquid?

    Apologies if this is an elementary question – I’m a pretty new reader and I am using this blog as one of my sources for education for idea generation and things to look at when making my own macro trades or evaluating them (with the intention of getting into a macro fund myself – I do some simple FX). This post singlehandedly got me interested in natural gas itself as a commodity and even if I end up not trading it (in whatever form) at least I will have learned a lot.

    In short, I just want to say thank you. Please keep on posting and commenting.

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