With oil surging, the oil-to-natural gas ratio has hit an all-time high.
Here’s the chart from Bespoke:
In theory this presents a nice arbitrage: Short oil/long natural gas.
Unfortunately, lots of folks have been creamed on this trade, because no matter how expensive oil gets, natural gas just won’t budget. And the reason is obvious. America is overflowing with natural gas, but it doesn’t have the infrastructure to take advantage of it. Not even close.
So if anyone is going to make the trade, it has to be Uncle Sam, the only “person” with the ability to actually do something about the infrastructure gap, allowing us to use more gas and less expensive oil. (With prices so cheap, no individual private company will take the plunge and build it out).
Now, you can dispute whether it’s a good idea for the US to make this investment or not. We’ll stay out. But it seems that for now nobody else can make that trade.