CL NG correlation chart

Discussion in 'Commodity Futures' started by oldtime, Jul 18, 2011.

  1. Can any of you youngsters who know how to use a computer post me a 1 yr correlation chart for CL NG?

    I'm not currently subscribed to any charting service.

    Maybe there's a place on the web that lets you do this?

    The reason I ask is because I'm paper trading a very nice little position which allows me a position in CL and NG without being too volatile for a small trader.

    The position is 1 QM + 1 QC vs 1 lO

    I don't know how well NG and CL correlate. Maybe not at all.

  2. bone

    bone ET Sponsor

    20 Year Correlation is + 83.5 %

    2 Year Correlation is - 48.7 %

    Reason ?

    The USA is the Saudi Arabia of Nat Gas. We are sitting on oceans of it in terms of supply.

  3. hey, thanks bone
  4. wrbtrader



    Thanks for the chart. I've seen similar over the past 10 years but notice the "lack of correlation" the past few years.

    Do you know why there's poor correlation the past few years in comparison to the past two decades. :confused:

  5. bone

    bone ET Sponsor

    Supply. Literally. That simple. US Nat Gas is the cheapest most plentiful hydrocarbon available to us. The proven discoveries that have already come on line and are scheduled to come on line the past couple of years accounts for the dramatic correlation unwinding.

    The United States is sitting on a vast underground ocean of Nat Gas. The US is, literally, the Saudi Arabia of Coal and Natural Gas in terms of proven global hydrocarbon reserves.

    Look at the Corn + Nat Gas vs. Ethanol Crack Spread.
  6. rosy2


  7. wrbtrader



    Bone and rosy2 for the info.

    Moral of the story...don't light a match when doing cave exploration in the U.S. and we need to educate the cows about their negative impact on the environment involving global warming. :D

    Eat less cow meat and eat/drink less dairy products should do the trick. :p

  8. bone

    bone ET Sponsor

    From a literal thermodynamic conversion standpoint (Btus to Btus), the distillation of Corn into Fuel-Grade Ethanol is the conversion of US Nat Gas into a liquid motor fuel. The price of Corn and the price of Nat Gas plus a Crude Oil analog mark-up for margin yields the wholesale rack price of ethanol for fuel blending.
  9. Trader13


    FWIW, a few years ago I spoke with some energy traders at a trading conference on some of the differences between these two fuels. They said that oil price volatility is related to currency movements since oil is priced as a global asset. Prices also move based on geopolitical events in the Middle East that impact supply, or any anticipation of supply disruption.

    Nat Gas, on the other hand, is sourced domestically and is not subject to currency fluctuations. Weather is the volatility driver for Nat Gas. I recall reading an article several years ago that a group of Nat Gas traders employed their own meteorologist to forecast weather and place trades accordingly.
  10. It's worth quite a bit to me
    #10     Jul 18, 2011