The difference between oil and natural gas is politics and speculation. While an overabundance of gas and a massive recession sent natural gas to just above $3 (down from about $13), oil fell from $147 to $33 over the same time period.

The last three months have been a different story. Oil flew off the bottom on the soft idea that a recovery would spark a surge in demand.

One-Year Natural Gas	Three-Month Crude

Natural gas didn’t participate in the rally. In fact, Bloomberg is reporting that natural gas is the worst-performing commodity of the year.

It has fallen 72% in 11 months and is now cheaper than it’s been since 1992. Stockpiles are 22% higher than their five-year average, which has lead to 56% of rigs being shut down. Things are so out of whack that oil now costs 18 times more than gas. This is the biggest gap since 1992.

This is good news for investors as it sets the stage for a massive recovery. It is more likely that price of natural gas could double to $7 than the price of oil will double again to $140.

All we need is a catalyst to drive up the price. Any of the following will do:

1. Natural gas is a clean, environmentally healthy energy source that is found in abundance in the U.S. Obama could push it as a transportation alternative.
2. Natural gas prices bottom in the summer and rise in the fall due to its use in home heating.
3. The unemployment number suggests that the recession is over and demand will pick up at a time when rigs have been idled and supply is curtailed.
4. The chart shows a double bottom.
5. In terms of the oil-to-natural gas ratio as well as dollars, natural gas is at an 18-year low.
6. A falling dollar will push up all commodities.
7. A hurricane will destroy the rigs in the Gulf of Mexico.

And of course, what’s in the news today: A new federal proposal to oversee a drilling technique known as “fracking.” As NPR reports, fracking involves injecting a million gallons or more of water and chemicals deep underground to pry out gas that's locked away in tight spaces.

Environmentalists want the federal government to regulate the practice because, in some cases, fracking may be harming nearby water wells. The industry says regulation should be left up to the states.

Any new regulation would restrict supply by lengthening the time for new rigs to start producing. This would drive prices further and faster during the recovery.

The number-one rule of investors is to buy low and sell high. Natural gas is now low. I will be putting out a buy in my trading service, Crisis Trader, this afternoon. Over the last quarter my readers have made a killing in oil and jr. gold stocks. Join us and profit.

Other Related Topics: Christian DeHaemer , Crisis Trader , Crude Oil , Natural Gas

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