Buying Oil, how best to do it ?
Discussion
I do think it is worthwhile for people to study the historical cost of oil. Because it was recently massively over priced the natural initial observation is to assume that at $30 it is unbelievably cheap.
What is important to note is that this is wrong. At $30 it is on the expensive side of the historical average range. Not only that but in 2016 we have been through a decade of massive oil reserve discovery/ expansion combined with huge tech advances that have reduced the cost of extraction.
Oil at $30 is still over priced and in order for it to climb strongly you require a geographical shock or a rigged market. What state is OPEC going to be in after America has finished with Saudi and will America be the new entity that governs the excess premium on oil?
Personally, I'm of the view that the market will be forced back up but I do feel that people should understand that oil today isn't cheap but still over priced and for it to go up requires essentially market manipulation.
Oil prices in USD, 1861–2016 (1861–1944 averaged US crude oil, 1945–1983 Arabian Light, 1984–2016 Brent). Red line adjusted for inflation, blue not adjusted.
What is important to note is that this is wrong. At $30 it is on the expensive side of the historical average range. Not only that but in 2016 we have been through a decade of massive oil reserve discovery/ expansion combined with huge tech advances that have reduced the cost of extraction.
Oil at $30 is still over priced and in order for it to climb strongly you require a geographical shock or a rigged market. What state is OPEC going to be in after America has finished with Saudi and will America be the new entity that governs the excess premium on oil?
Personally, I'm of the view that the market will be forced back up but I do feel that people should understand that oil today isn't cheap but still over priced and for it to go up requires essentially market manipulation.
Oil prices in USD, 1861–2016 (1861–1944 averaged US crude oil, 1945–1983 Arabian Light, 1984–2016 Brent). Red line adjusted for inflation, blue not adjusted.
^^^
DA you forget in your analysis that most of the oil we now produce is in harder and more costlier places to recover ie deep water or shale with higher drilling costs at 30$ its not sustainable for the long term.The shale industry in the states is hanging in due to hedges, all deep water projects are being shelved , there's going to be one hell of a squeeze. I really do think we'll hit that $200 barrel within a couple of years!
As one of the Saudi ministers said recently ' look on these prices as a gift from God'
DA you forget in your analysis that most of the oil we now produce is in harder and more costlier places to recover ie deep water or shale with higher drilling costs at 30$ its not sustainable for the long term.The shale industry in the states is hanging in due to hedges, all deep water projects are being shelved , there's going to be one hell of a squeeze. I really do think we'll hit that $200 barrel within a couple of years!
As one of the Saudi ministers said recently ' look on these prices as a gift from God'
dingg said:
^^^
DA you forget in your analysis that most of the oil we now produce is in harder and more costlier places to recover ie deep water or shale with higher drilling costs at 30$ its not sustainable for the long term.The shale industry in the states is hanging in due to hedges, all deep water projects are being shelved , there's going to be one hell of a squeeze. I really do think we'll hit that $200 barrel within a couple of years!
As one of the Saudi ministers said recently ' look on these prices as a gift from God'
Partly. Certainly seems true for US production but in terms of global demand we can get all we need out of the ME and other cheap sources. The advances in tech to extract shale oil has also brought down those high costs quite a bit. We would also need quite a large spike in true demand in order to need much more than all the cheap wells can supply.DA you forget in your analysis that most of the oil we now produce is in harder and more costlier places to recover ie deep water or shale with higher drilling costs at 30$ its not sustainable for the long term.The shale industry in the states is hanging in due to hedges, all deep water projects are being shelved , there's going to be one hell of a squeeze. I really do think we'll hit that $200 barrel within a couple of years!
As one of the Saudi ministers said recently ' look on these prices as a gift from God'
Personally, I agree with you that there will be a spike. I'm sure that in a few years the media will be back to talking about peak oil and how we are all going to die and I'm sure at the peak of the next bubble we will see prices above the last peak. But, most of the people buying in now won't survive to see it as they will have jumped in too early and either been spiked out of positions or lost a fortune in funding costs. It's a very difficult product to invest in over the longer term and my view is that it's only worth bearing those costs when you are backed 100% by sentiment, which I can't really see being the case for a while yet.
dingg said:
Dr Kent Moors. The man who has advised countries you've never heard of and works at a university you've never heard of. He may well be correct but when you call a thousand different things a day one of them has to be right at some point.
t argument explaining why Oil is making new lows very soon. 
Maybe. But for anything of any substance you need a supply cut and we are in fact seeing increases instead. Storage is pretty much full.
US shale oil production, the very target of the Saudi attack and supposed to have been in rapid shutdown by now according to their master plan has just increased output to 5m/day.
There is over 2m/day having to go into storage.
No one had blinked yet. America has increased supply. OPEC has increased supply. Demand is falling. Storage is at maximum capacity. All signs really that oil is too expensive.
US shale oil production, the very target of the Saudi attack and supposed to have been in rapid shutdown by now according to their master plan has just increased output to 5m/day.
There is over 2m/day having to go into storage.
No one had blinked yet. America has increased supply. OPEC has increased supply. Demand is falling. Storage is at maximum capacity. All signs really that oil is too expensive.
DonkeyApple said:
Maybe. But for anything of any substance you need a supply cut and we are in fact seeing increases instead. Storage is pretty much full.
US shale oil production, the very target of the Saudi attack and supposed to have been in rapid shutdown by now according to their master plan has just increased output to 5m/day.
There is over 2m/day having to go into storage.
No one had blinked yet. America has increased supply. OPEC has increased supply. Demand is falling. Storage is at maximum capacity. All signs really that oil is too expensive.
I hear you but is there not a good chance OPEC will step in, if only to release a statement that it might intervene to stabilise the market, should support futures prices at least. It wouldn't take much to cause a modest rise in these jittery markets. Plus all the stuff above has arguably already been priced in. Nothing's for certain obviously but may be worth a punt with appropriate stops.US shale oil production, the very target of the Saudi attack and supposed to have been in rapid shutdown by now according to their master plan has just increased output to 5m/day.
There is over 2m/day having to go into storage.
No one had blinked yet. America has increased supply. OPEC has increased supply. Demand is falling. Storage is at maximum capacity. All signs really that oil is too expensive.
Agree. Saudi at some point will find the way to re-insert an OPEC price floor eventually. But trying to bet on when that event will happen is much higher risk than trading it when it does. And once you've got the stops right for the risk then the likelihood of being stopped is so high.
I think that if you can day trade the swings then it's a fantastic market but personally I don't see any upside in holding overnight positions in such a whacky market unless taking a very long term view and averaging in?
I think that if you can day trade the swings then it's a fantastic market but personally I don't see any upside in holding overnight positions in such a whacky market unless taking a very long term view and averaging in?
Decent reaction to the recent lows, inventories in 8 mins could be a similar flush down and squeeze like last time.
Wti futures volume record today 1.5million, could be significant seeing as of yet it didn't break down in a big way.
Wti futures volume record today 1.5million, could be significant seeing as of yet it didn't break down in a big way.
Edited by twinturboz on Wednesday 10th February 19:08
ExPat2B said:
How can I best capitalise on this ?
Not like this: http://www.bloomberg.com/news/articles/2015-11-03/...MitchT said:
I was wondering about oil too. Problem is, I'm not in a position to take physical delivery of oil and spread betting companies aren't offering futures beyond April. I'd like a way to dump £10k into crude now and leave it for a few years.
Haha I love that you actually considered taking delivery. Why not invest in an oil company?
The Beast of Codfin said:
Haha I love that you actually considered taking delivery.
I didn't really. I asked about gaining exposure to crude oil prices on here once before and someone else brought up the issue of taking delivery and storage - things which would be factors if I bought real oil futures. The suggestion at the time was spread betting but as I mentioned, the contracts aren't nearly long enough. I want to buy and hold.The Beast of Codfin said:
Why not invest in an oil company?
The Beast of Codfin said:
Why not invest in an oil company?
MitchT said:
I'm going to look into this - see how oil company prices move relative to crude prices and see if there's enough upside.
If you can buy Shell at between £10 and £12, it might work for you.
The dividend yield then would be an amazing (not guaranteed) percentage, and that Company have not cut their dividend for about 45 years. Probably a record that the present board, will hope not to be remembered for ending.
Recently the price went down towards £12, so I will keep watching..
As I always say, I have no idea what is going to happen, but my overall investment is quite good.
Taking a step back, ignoring daily market movements, and looking for trends, I think is helpful for longer-term investing.
Edited by Jon39 on Saturday 13th February 12:35
I would tend to agree. The risk though with the dividend is that it's a bit of a waste to be paying out more than needed and as the average yield of the sector and markets in general falls then it makes more and more sense to trim it back accordingly. Rolls Royce cut last week and I don't think they will be the last of the long standers to do so and as more do then the others become more emboldened to follow.
My view is that there isn't any rush to go long on oil or oil stocks from an investment perspective but any strategy to do so ought to be based around drip feeding cash in over time.
For the more adventurous then the mid level of the oil market that survives the cycle are going to be prime targets for stripping by the big firms looking to out compete each other in the next up cycle. But I wouldn't even waste my time in that part of the market until the Saudi v US game is over and the floor is in for oil.
My view is that there isn't any rush to go long on oil or oil stocks from an investment perspective but any strategy to do so ought to be based around drip feeding cash in over time.
For the more adventurous then the mid level of the oil market that survives the cycle are going to be prime targets for stripping by the big firms looking to out compete each other in the next up cycle. But I wouldn't even waste my time in that part of the market until the Saudi v US game is over and the floor is in for oil.
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