Natural Gas Prices Falling Steadily, Oil Still Looking Weak

It seems like natrual gas prices reflect economic reailties with much less noise than other commodities. The end result is the same, but volatility differs.

Take a look at the chart for US Natural Gas (UNG):

Click on image to enlarge.

Since the commodity bust in July 2008 natural gas prices have declined at a remarkably steady pace, reflecting an ongoing decline in energy demand for households.

Here is a comparison between oil (USO) and natural gas (USG) for the same period:

Click on image to enlarge.

While both have been moving down, oil acts a whole lot more volatile and seems to be subject to more speculation than natural gas.

Looking at the chart above, and taking into account all the deflationary fundamentals that still persist, my guess is that oil will make another move down from here and drop more strongly than natural gas, continuing the oscillatory pattern.

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