Nat-Gas Stocks Go Their Own Way: Up

There is absolutely zero arbitrage between natural gas and oil. The two have been diverging for months. But the natural gas stocks trade better than the oil stocks, and it's been a quandary that's driving the market -- and me -- crazy.

We are in a profound period of natural gas oversupply. There's been a huge decline in natural gas being pumped to bring it in line with demand, yet the amount of liquid natural gas coming into this country in the next two years is off the charts. The government has not supported this cleaner carbon fuel one whit. You never hear about it. Ever. Yet it is in massive abundance. What's really telling is that anyone who can switch easily from oil to natural gas already has, so there's not a lot of arbitrage.

Yet Ultra Petroleum (UPL - commentary - Trade Now), Apache (APA - commentary - Trade Now), XTO Energy (XTO - commentary - Trade Now) and Chesapeake (CHK - commentary - Trade Now) trade like houses on fire. Yesterday, Rick "Top Gun Trader" Bensignor said Chesapeake may be among the best charts in the books.

All of this while natural gas takes out $4 and oil takes out $60, yet Chevron (CVX - commentary - Trade Now) can't get out of its way, and BP (BP - commentary - Trade Now) is still way below where I think it should be.

The disparity is beyond comprehension unless there is going to be a wave of consolidation, and I don't see that coming. Sure, the group got radically oversold as the hedge funds were loaded to the gills, perhaps betting that prices would go ever higher. I think the stocks' resilience has to do with a belief that natural gas can't get any lower.

I was in that camp too.

I am now beginning to question my own view.

The stocks just don't quit. I don't get it. I would like very much to buy Devon (DVN - commentary - Trade Now) because it has new reserves coming on stream, but until I see some sort of bottom in the futures, I can't pull the trigger.

At the time of publication, Cramer had no positions in stocks mentioned.

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