what is the oil price to natural gas ratio 
as its name suggests the oil price to natural gas ratio is a ratio in which the price of oil is the numerator and the price of natural gas is the denominator the purpose of the oil price to natural gas ratio is to capture the relative valuation of these two important energy commodities it is widely used by commodities traders energy analysts and investors understanding the oil price to natural gas ratiocrude oil and natural gas are important energy commodities that are actively traded on commodities markets such as the new york mercantile exchange nymex they are widely used as fuels for heating and electricity generation throughout the world one nymex crude oil contract is equivalent to 1 000 barrels of crude oil whereas one natural gas contract equals 10 000 british thermal units mmbtu of natural gas 2 3 when calculating the oil price to natural gas ratio the oil numerator refers to barrels of oil whereas the natural gas denominator refers to units of 10 mmbtu the higher the oil price to natural gas ratio the greater the price of oil relative to natural gas if the ratio declines then this means the difference in the prices of the two commodities is narrowing oftentimes traders will purchase crude oil futures when the oil price to natural gas ratio is below its historical averages believing that they are receiving a bargain price for oil likewise they will purchase natural gas futures when the ratio is above its historical norm the same strategy can also work in reverse selling oil futures when the ratio is high and selling natural gas futures when the ratio is low real world example of the oil price to natural gas ratiothe oil price to natural gas ratio has shown a fair amount of volatility in recent years up until 2009 for instance the ratio averaged about 10 1 meaning that when oil was at 50 a barrel natural gas would be at 5 per mmbtu in april 2012 however the ratio jumped to 50 1 with oil at 120 per barrel and natural gas at only 2 per mmbtu just a few years later between june 2014 and march 2015 the price of oil dropped to 45 per barrel bringing the ratio down to 16 1 1but perhaps the most dramatic recent event in the oil price to natural gas ratio occurred in april 2020 when the price of oil hit historic lows as a result of the 2020 global crisis during this period crude oil reached 15 per barrel while natural gas reached 1 91 per mmbtu yielding a ratio of 8 1 1