For the past several years, we've checked in with the oil to natural gas ratio to find great investment opportunities. While "energy cousins" oil and gas have similar applications, the price between the two gets out of whack from time to time.
Years ago, you could consider natural gas cheap relative to oil when the ratio reached 14. New drilling technologies have changed the nature of this ratio, and now we need a reading of 22 before we'll call gas "cheap."
As you can see from today's chart, the oil to gas ratio has reached the low 20s four times in the past two years. Each time, natural gas rallied hard from this extreme "boiling point" reading of cheapness.
Now note the right-hand side of the chart. Mild weather has reduced demand for natural gas-fired heating, which has pushed the price of gas down… and sent the reading back to 22. This makes income-producing royalty trusts and large "hoards" of natural gas an attractive way to own vast amounts of this cheap and clean source of energy.
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