Seasonal influences According to SeasonalCharts.com, natural gas and crude oil prices have corresponding periods of seasonal strength early in the year.

However, seasonal trends vary thereafter. The seasonality chart on natural gas from 1990 to 2005 shows a period of strength from mid-February to the end of April followed by a second period of strength from the end of July to the end of October.

In contrast, the seasonality chart on crude oil for the period from 1983 to 2005 shows a period of seasonal strength from the end of February to the middle of October.

As noted in this column on Nov. 10, the TSX Energy Index has a period of seasonal strength from the end of November to the end of May.

Fundamental influences

Inventory levels in the United States currently favour crude oil over natural gas, but that could change shortly.

Crude oil inventories have reached a three-year low. Natural gas inventories remain well above their five-year average. However, many U.S. utilities have the ability to switch from crude oil to natural gas (and vice versa) in order to fuel their power plants when prices are "out of whack."

When the ratio between natural gas prices and crude oil prices reaches the 0.075 level, natural gas is significantly less expensive than crude oil and utilities will switch at least part of their fuel requirements to natural gas.

The 0.075 level has been reached on eight occasions during the past 14 years. The most recent occasion was three weeks ago. On each occasion, the price of natural gas has advanced significantly (i.e. usually more than 50%) during the next few months.

Conversely, when the natural gas/crude oil ratio reaches 0.25, utilities have an incentive to switch from natural gas to crude oil.

Technical influences Natural gas prices are far from their record high at US$15.50 set in December, 2005. They have traded in a range between US$5.25 and US$9 per MBtu. during the past two years. Recently, they have bounced from support at US$7 and appear poised to test resistance at US$9.

Ways to invest Investors can take advantage directly in an increase in the natural gas/ crude oil ratio by owning the exchange-traded fund U.S. Natural Gas Fund LP (UNG/

AMEX).

Alternately, they can favour "gassy" stocks and trusts over "oily" stocks and trusts. The strategy looks particularly interesting during the current period of seasonal strength lasting until May. - Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at www.timingthemarket.ca.Mr. Vialoux does not own securities mentioned in this report.