The Crash Continues: Oil/Natural Gas Ratio

This is one that we haven’t discussed here in a while but I think it’s worth mentioning. Long time readers remember how annoying I was about the Crude Oil to Natural Gas bubble back in early 2012. A spread that has averaged 10:1 over the past 20 years went parabolic above 54:1 in the second quarter 2012.
I wrote countless blog posts about this, mentioned it on TV several times, and followed up afterwards. But the crash continues into 2014. What was once as high as 54:1 is now down to 18:1 and still falling hard putting in fresh multi-year lows this month. Here’s the beauty of the whole thing: prices are still 45% away from the historic mean. And more importantly remember that, “we are not just in a reversion to the mean business, but in a reversion beyond the mean business” (to quote Soros’ technician John Roque).
Here is the chart of the bubble popping and subsequent crash:

This is a monthly line chart, so it does not show the absolute highs above 54:1, just the monthly closing prices. But you get the idea. I would not be surprised to see this thing down under 8:1 – 10:1.
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