The price of oil has always been front and center for market watchers, but it is now watched as closely as ever.
There are a variety of reasons for this.
One is oil’s wild ride last year.
It rocketed all the way up to $147.50 a barrel last June before plummeting down to $33 in January/February of this year. (At that time, Russian government sources told me the government there was making budget plans assuming that oil would hit $20 a barrel.)
Another reason is the fact that demand for oil simply has to pick up if and when the global economy resumes growth.
Supply and demand are the most important factors in determining the price of anything, but Dan Niles, Co-Chief Investment Officer at Alpha One Capital Partners, is closely watching another way to view oil prices, and that is their relationship to natural gas.
As Dan recently emailed me, oil has historically traded at 8x to 10x the price of natural gas.
One of the reasons it usually stays within that range is the law of physics: On a thermal basis, it takes roughly six times the amount of oil to generate the same amount of heat as natural gas.
