Author Topic: Recent Oil Prices  (Read 13437 times)

Cwadda

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Recent Oil Prices
« on: July 28, 2015, 11:13:10 AM »
Oil has been going down again. The Vanguard ETF is at $100, which is about what it was when the shale boom was happening late last year. (http://forum.mrmoneymustache.com/investor-alley/where-is-the-bottom-for-crashing-oil-prices/)

Any thoughts on this?

Financial.Velociraptor

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Re: Recent Oil Prices
« Reply #1 on: July 28, 2015, 11:27:52 AM »
I think prices below 55/bbl have to be relatively short lived.  The swing barrel shale producers have a break even somewhere around 55.  Lower and their capex falls to zero making it just a matter of the months it takes to get to the tail end of the well production curve before supply plummets.

Iran is a wildcard.  They may start shipping again soon but I suspect they have a lot of recent underinvestment and need a year or more to get back to full production.

forummm

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Re: Recent Oil Prices
« Reply #2 on: July 29, 2015, 06:02:34 AM »
There are plenty of smart people with access to billions of dollars to invest, and their alternatives are providing low returns. If the smart money is already in, or not in oil, why do you think you can outsmart them?

gReed Smith

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Re: Recent Oil Prices
« Reply #3 on: July 29, 2015, 07:40:55 AM »
I don't try to time the market or any particular sector, but I will offer some info.  I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.  Now, if everyone "knows" this info, arbitrageurs would all be trading the price of oil up to $60 already, so there must be enough contrarians to prevent this from being a safe bet.

hodedofome

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Re: Recent Oil Prices
« Reply #4 on: July 29, 2015, 08:37:25 AM »
I might be tempted to catch a bounce here or there based on crashing prices, sentiment and/or technical reasons, but I'd never bet against a slow grind down in prices.

bdbrooks

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Re: Recent Oil Prices
« Reply #5 on: July 29, 2015, 10:52:46 AM »
First of all recognize that this is a speculative move. Then determine how much money you can afford to speculate with. Then come up with a systematic approach that a) you can follow and b) increases your chances of making money.

I have traded speculated in oil this year. My approach was start a small position in a long oil etf when oil crossed under $50/barrel. I would then double up my position if it crossed under $47.5. I would then double up again if it crossed under $45. I would then sell my etf and by UCO, which is 2x leveraged, if it crossed under $42.5. I would then sell UCO and buy UWTI, 3x leveraged, if it crossed under $40 a barrel. My exit strategy was to sell once the price of oil was $10 higher than than when I initiated. Notice that if oil drops below $40 a barrel I have no more fuel to throw on the fire and could very well lose a significant portion of what was invested. That is why this is speculative. I am comfortable with it because I don't see it dropping significantly below 40 for any significant length of time, but you have to recognize it as a possibility and substantial risk.

As you can see, this is clearly a speculative endeavor. I am NOT recommending you do this. I posted this to show the kind of process you need and that it would make most people realize how risky it is. It made good money back around March and April, and I am starting to build exposure to it again.

The other thing, most people don't have much money that they can categorize as "speculative". If you used my methodology, your initial trade would only be 1/4th of your speculative money (because you would double to 1/2 at 47.5 and double to all in at 45). So if you only have less than 10k as "speculative money" then this probably isn't worth your time either.

I don't know you, but I would recommend to 99.99% of people to not try this. I am very comfortable with investment risk. Most people aren't. Most people feel the pain of losing $1 is equivalent to the happiness of gaining $3. So most people should focus on taking an appropriate level of risk and minimizing fees.

Cwadda

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Re: Recent Oil Prices
« Reply #6 on: July 29, 2015, 09:19:15 PM »
There are plenty of smart people with access to billions of dollars to invest, and their alternatives are providing low returns. If the smart money is already in, or not in oil, why do you think you can outsmart them?

Haha, I can't. I'm merely stirring discussion because it interests me and I am going into the industry.

Still 100% invested in VTSAX :)

Thanks ya'll, interesting posts.

Financial.Velociraptor

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Re: Recent Oil Prices
« Reply #7 on: July 30, 2015, 12:16:53 PM »
There are plenty of smart people with access to billions of dollars to invest, and their alternatives are providing low returns. If the smart money is already in, or not in oil, why do you think you can outsmart them?

Haha, I can't. I'm merely stirring discussion because it interests me and I am going into the industry.

Still 100% invested in VTSAX :)

Thanks ya'll, interesting posts.

What part of the industry are you going into?  I am FIRE from oilfield services.

hodedofome

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Re: Recent Oil Prices
« Reply #8 on: July 30, 2015, 12:58:05 PM »

fattest_foot

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Re: Recent Oil Prices
« Reply #9 on: July 30, 2015, 01:54:45 PM »
I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.

Someone needs to tell California.

BTDretire

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Re: Recent Oil Prices
« Reply #10 on: July 31, 2015, 10:38:52 AM »
I don't try to time the market or any particular sector, but I will offer some info.  I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.  Now, if everyone "knows" this info, arbitrageurs would all be trading the price of oil up to $60 already, so there must be enough contrarians to prevent this from being a safe bet.

  I've been watching oil related stocks for a while now.
Ever since relatives bought in at high prices.
OIl down from $108 to $47
Chevron (CVX) pays 4.7% divdend and is down 30% over a year. Down over 3.5% today!
Exxon-Mobil (XOM) pays 3.2% dividend is down 20% over a year.
BP  pays 6.6% dividend is down 24% over a year.
Royal Dutch Shell pays 4.7% is down 30% over a year.
Oil Services
Schumberger (SLB) PAYS 2.4% dividend is down 24% over a year.
Haliburton (HAL) pays 1.7% dividend is down 40% over a year.
 Some predicted oil in the low $40s If it gets there I'll be a buyer,
If this upper $40s price holds into middle Sept. I'll be very tempted.
Things to watch, how will Iran's production effect price, will China's
economy continue to consume, and Saudi Arabia's response to world demand.
  CNBC just reported XOM, CVX poor earnings driving prices down.
Suggestred 3 to 5 year horizon for better numbers.
 Who's crystal ball sees the future?
  Good Luck.
I'm mostly in VTSAX!
     

gReed Smith

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Re: Recent Oil Prices
« Reply #11 on: July 31, 2015, 10:59:03 AM »
I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.

Someone needs to tell California.

Just to clarify, I mean the wellhead price of natural gas, not gasoline for your car.

ShoulderThingThatGoesUp

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Re: Recent Oil Prices
« Reply #12 on: July 31, 2015, 11:10:27 AM »
Standard advice tells me that I'm underweight in "alternatives". I've thought about putting some money in a commodities basket ETF when I do my annual rebalance in August. Thoughts on generalized commodity ETFs?

cdm

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Re: Recent Oil Prices
« Reply #13 on: July 31, 2015, 01:33:01 PM »
This guy has some interesting information on oil and gas on his blog:
http://www.artberman.com/blog/

This is a really interesting video but it is from February 2015. I think it gives a perspective on the impact of the shale oil and how it is in deep trouble.
https://www.youtube.com/watch?v=5Ae1fg44l7E

I agree with bdbrooks when he says it's speculation to figure out where oil prices are going. Opec and Russia and a lot of other factors are going determine where it goes. 

hodedofome

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Re: Recent Oil Prices
« Reply #14 on: July 31, 2015, 03:16:05 PM »
Standard advice tells me that I'm underweight in "alternatives". I've thought about putting some money in a commodities basket ETF when I do my annual rebalance in August. Thoughts on generalized commodity ETFs?

Don't buy commodity ETFs that attempt to track prices of commodities, only buy ETFs that invest in companies in that space. So you buy XLE or OIH or something like that, not USO, USL, DBO or UNG. About the only commodity ETF that could possibly be worth buying for a longer term investment may be GLD, and that's only because they claim to physically own and store the stuff.

beltim

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Re: Recent Oil Prices
« Reply #15 on: July 31, 2015, 03:19:57 PM »
Standard advice tells me that I'm underweight in "alternatives". I've thought about putting some money in a commodities basket ETF when I do my annual rebalance in August. Thoughts on generalized commodity ETFs?

Don't buy commodity ETFs that attempt to track prices of commodities, only buy ETFs that invest in companies in that space. So you buy XLE or OIH or something like that, not USO, USL, DBO or UNG. About the only commodity ETF that could possibly be worth buying for a longer term investment may be GLD, and that's only because they claim to physically own and store the stuff.

This is really good advice.  I'd go one further and say that owning gold isn't an investment - it doesn't produce anything but is instead speculation.  I'd rather own gold miners, because at least they sometimes show a profit.

Cwadda

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Re: Recent Oil Prices
« Reply #16 on: August 03, 2015, 09:22:25 AM »
There are plenty of smart people with access to billions of dollars to invest, and their alternatives are providing low returns. If the smart money is already in, or not in oil, why do you think you can outsmart them?

Haha, I can't. I'm merely stirring discussion because it interests me and I am going into the industry.

Still 100% invested in VTSAX :)

Thanks ya'll, interesting posts.

What part of the industry are you going into?  I am FIRE from oilfield services.

I'm getting a B.S. in Geoscience and B.S. in Environment Science. After that I'm going for an M.S. in Geoscience. That's the plan at least.

@Everyone else, thanks for the posts. I'll do some reading, but my money's not going anywhere.
« Last Edit: August 03, 2015, 09:25:04 AM by Cwadda »

Financial.Velociraptor

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Re: Recent Oil Prices
« Reply #17 on: August 03, 2015, 11:43:55 AM »

I'm getting a B.S. in Geoscience and B.S. in Environment Science. After that I'm going for an M.S. in Geoscience. That's the plan at least.

That can be very lucrative but not so much in North America.  If you are willing to go international, you could earn a real premium pay rate.

DaKini

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Re: Recent Oil Prices
« Reply #18 on: August 03, 2015, 12:22:29 PM »
Standard advice tells me that I'm underweight in "alternatives". I've thought about putting some money in a commodities basket ETF when I do my annual rebalance in August. Thoughts on generalized commodity ETFs?

Don't buy commodity ETFs that attempt to track prices of commodities, only buy ETFs that invest in companies in that space. So you buy XLE or OIH or something like that, not USO, USL, DBO or UNG. About the only commodity ETF that could possibly be worth buying for a longer term investment may be GLD, and that's only because they claim to physically own and store the stuff.
Uh, what were the facts for not owning such a bssket again?

This is really good advice.  I'd go one further and say that owning gold isn't an investment - it doesn't produce anything but is instead speculation.  I'd rather own gold miners, because at least they sometimes show a profit.

hodedofome

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Re: Recent Oil Prices
« Reply #19 on: August 03, 2015, 12:57:48 PM »
DaKini I'm assuming you mean why should someone not own DBC. The reason for it is that the way the ETFs are structured it makes them very poor investments. Only suitable for trading. Because a lot of the commodity contracts are in contango currently, it means the ETFs have to keep rolling over the contracts into more expensive ones each month/quarter, continually losing money even if the spot price remains unchanged. Unless you plan on buying the specific commodities and storing it yourself, any holding periods more than a few days/weeks is asking for trouble, if your vehicle is DBC,DJP,GSG,USCI,RJI,USO,OIL,UNG,DBO,USL etc etc.

ETFs that don't suffer from this may be GLD or SLV, but that's because they claim to physically buy the gold or silver and store it.

There's not much contango in currency ETFs which is why those are ok to hold, though they usually don't move that much either way. It doesn't cost hardly anything to 'store' currencies and stock/bond futures, so that's why. It costs a ton to store physical commodities like corn and oil and gas, so contango in those can be significant. Think of it as selling an oil contract to someone 1 year in the future and you store it at your facility. If supply and demand are identical 1 year from now, you're gonna sell it at today's price + your storage costs. So, the buyer is almost always paying up over today's price.
« Last Edit: August 03, 2015, 01:30:23 PM by hodedofome »

BTDretire

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Re: Recent Oil Prices
« Reply #20 on: August 06, 2015, 06:44:48 AM »
I don't try to time the market or any particular sector, but I will offer some info.  I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.  Now, if everyone "knows" this info, arbitrageurs would all be trading the price of oil up to $60 already, so there must be enough contrarians to prevent this from being a safe bet.

  I've been watching oil related stocks for a while now.
Ever since relatives bought in at high prices.
OIl down from $108 to $47
Chevron (CVX) pays 4.7% divdend and is down 30% over a year. Down over 3.5% today!
Exxon-Mobil (XOM) pays 3.2% dividend is down 20% over a year.
BP  pays 6.6% dividend is down 24% over a year.
Royal Dutch Shell pays 4.7% is down 30% over a year.
Oil Services
Schumberger (SLB) PAYS 2.4% dividend is down 24% over a year.
Haliburton (HAL) pays 1.7% dividend is down 40% over a year.
 Some predicted oil in the low $40s If it gets there I'll be a buyer,
If this upper $40s price holds into middle Sept. I'll be very tempted.
Things to watch, how will Iran's production effect price, will China's
economy continue to consume, and Saudi Arabia's response to world demand.
  CNBC just reported XOM, CVX poor earnings driving prices down.
Suggestred 3 to 5 year horizon for better numbers.
 Who's crystal ball sees the future?
  Good Luck.
I'm mostly in VTSAX!
     

Wow, this an interesting article.
 It suggests Saudi Arabia does not have enough reserves to depress oil prices long
enough to shut down the production of mid and low cost producers

http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html

Even before I saw this article, I heard two talking heads suggesting WTI could get into the $30's range.

spud1987

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Re: Recent Oil Prices
« Reply #21 on: August 06, 2015, 10:36:57 AM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).

If stock prices recover about 10-20% by 2017 I'll be able to cash out these options for $10k. Of course there is also a major risk that I'll lose my entire $2k. Luckily this only accounts for .3% of my NW and my other assets are all in index funds.

forummm

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Re: Recent Oil Prices
« Reply #22 on: August 06, 2015, 11:08:40 AM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).

If stock prices recover about 10-20% by 2017 I'll be able to cash out these options for $10k. Of course there is also a major risk that I'll lose my entire $2k. Luckily this only accounts for .3% of my NW and my other assets are all in index funds.

I always ask myself: If it looks so good to me, why is someone taking the other side of that bet?

BTDretire

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Re: Recent Oil Prices
« Reply #23 on: August 06, 2015, 11:32:14 AM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).

If stock prices recover about 10-20% by 2017 I'll be able to cash out these options for $10k. Of course there is also a major risk that I'll lose my entire $2k. Luckily this only accounts for .3% of my NW and my other assets are all in index funds.

I always ask myself: If it looks so good to me, why is someone taking the other side of that bet?

The 6 top reasons oil prices are headed lower.
http://www.oil-price.net/en/articles/top-6-reasons-oil-price-are-headed-lower.php
WTI down $0.59 todat, but CVX and XOM up ~1%
RIG a Oil & Gas Drilling & Exploration company is very volitile, up over 9% as I write.
I now feel I'm not smart enough for oil :-)

spud1987

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Re: Recent Oil Prices
« Reply #24 on: August 06, 2015, 11:45:20 AM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).

If stock prices recover about 10-20% by 2017 I'll be able to cash out these options for $10k. Of course there is also a major risk that I'll lose my entire $2k. Luckily this only accounts for .3% of my NW and my other assets are all in index funds.

I always ask myself: If it looks so good to me, why is someone taking the other side of that bet?

Yep. The other side of this bet is that someone is selling a call option because they think that oil prices will languish for the next two years. This is obviously a valid point of view.

We'll see. Notice that I called this a bet and not an "investment." This is money that I may lose and I'm okay with that.

PS: up 20% already. Maybe I should sell! :p

RFAAOATB

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Re: Recent Oil Prices
« Reply #25 on: August 13, 2015, 11:13:31 AM »
I am tempted to get in on this.  I am a bit behind for the year on my Fidelity Roth IRA.  Do I want to stick with 100%  FSTVX Spartan Total Market Index Fund or buy into an energy fund or Exxon Mobil.  I passed last year on getting in with the Ali Baba IPO which is not lower than that, and I don't have a concrete plan on how to get into buying energy, but the price seems unnaturally low compared to where we will be in 6 more years.  After all just like real estate, oil should only go up if you can survive the crash.

Without a concrete plan and enough money to risk, I will probably stay 100% FSTVX, but am interested on if and when I should branch out.

ShoulderThingThatGoesUp

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Re: Recent Oil Prices
« Reply #26 on: August 13, 2015, 11:21:35 AM »
I don't try to time the market or any particular sector, but I will offer some info.  I recently attended an oil and gas industry conference (I work in the industry) and the general consensus was that oil is underpriced and will settle between $60-70, but gas is doomed to remain under $4 for a decade or so because of the oversupply from shale drilling.  Now, if everyone "knows" this info, arbitrageurs would all be trading the price of oil up to $60 already, so there must be enough contrarians to prevent this from being a safe bet.

  I've been watching oil related stocks for a while now.
Ever since relatives bought in at high prices.
OIl down from $108 to $47
Chevron (CVX) pays 4.7% divdend and is down 30% over a year. Down over 3.5% today!
Exxon-Mobil (XOM) pays 3.2% dividend is down 20% over a year.
BP  pays 6.6% dividend is down 24% over a year.
Royal Dutch Shell pays 4.7% is down 30% over a year.
Oil Services
Schumberger (SLB) PAYS 2.4% dividend is down 24% over a year.
Haliburton (HAL) pays 1.7% dividend is down 40% over a year.
 Some predicted oil in the low $40s If it gets there I'll be a buyer,
If this upper $40s price holds into middle Sept. I'll be very tempted.
Things to watch, how will Iran's production effect price, will China's
economy continue to consume, and Saudi Arabia's response to world demand.
  CNBC just reported XOM, CVX poor earnings driving prices down.
Suggestred 3 to 5 year horizon for better numbers.
 Who's crystal ball sees the future?
  Good Luck.
I'm mostly in VTSAX!
     

Wow, this an interesting article.
 It suggests Saudi Arabia does not have enough reserves to depress oil prices long
enough to shut down the production of mid and low cost producers

http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html

Even before I saw this article, I heard two talking heads suggesting WTI could get into the $30's range.

The analyses I've seen don't support the idea that oil will then go back up to $100, though, because the House of Saud's market-flooding has caused US shale companies to create lower-cost drilling systems.

nereo

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Re: Recent Oil Prices
« Reply #27 on: August 13, 2015, 11:33:08 AM »
my own, non-technical read:
China's economy seems to be stumbling ( - demand)
Iran is increasing production (+ supply)
OPEC is keeps churning out oil (+ supply)
Fracking keeps getting cheaper & can ramp up/down fairly rapidly.

Until global demand picks back up (led by China) and/or supply falls sharply the price is going to remain depressed.  I see $50-60/barrel over the next 12 months... but of course I could be completely wrong.

RFAAOATB

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Re: Recent Oil Prices
« Reply #28 on: August 13, 2015, 12:07:32 PM »
my own, non-technical read:
China's economy seems to be stumbling ( - demand)
Iran is increasing production (+ supply)
OPEC is keeps churning out oil (+ supply)
Fracking keeps getting cheaper & can ramp up/down fairly rapidly.

Until global demand picks back up (led by China) and/or supply falls sharply the price is going to remain depressed.  I see $50-60/barrel over the next 12 months... but of course I could be completely wrong.

What about past environmentalists claims that we are running out of oil in the coming decades?  Will renewables, electric, natural gas, and coal become efficient and popular enough to crowd oil out of the market before oil runs out, or will we still be dependent on oil while its running out?

nereo

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Re: Recent Oil Prices
« Reply #29 on: August 13, 2015, 12:25:48 PM »

What about past environmentalists claims that we are running out of oil in the coming decades?  Will renewables, electric, natural gas, and coal become efficient and popular enough to crowd oil out of the market before oil runs out, or will we still be dependent on oil while its running out?

My post was looking at where oil prices might be over the next 6mo - 2yr.  Things are bound to be very different over much longer time scales (decades).
Certainly renewables have had a slight downward pressure on oil prices, but not overwhelmingly so since cars are still predominantly powered by gasoline and diesel.  All-electric vehicles are still a tiny fraction.
'Peak Oil' has been talked about since the 1960s, but we haven't hit it yet.  It's just getting more expensive to remove and refine.  A few decades is a very long time and my optimistic hope is that we will be using a fraction the amount of fossil fuels as alternatives to energy production become cheaper relative to oil. 
« Last Edit: August 13, 2015, 12:27:24 PM by nereo »

hodedofome

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Re: Recent Oil Prices
« Reply #30 on: August 13, 2015, 08:24:05 PM »
I'll get interested when energy funds shut down, individual companies go bankrupt and production begins to go down. Until then, I have better opportunities for now.

hodedofome

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Re: Recent Oil Prices
« Reply #31 on: August 14, 2015, 07:53:41 AM »
Oh, and I don't really care for buying in a slow, grind down. You never know how long that grind will last. I'd rather see some sort of bottom happen. That means you won't ever catch the absolute low, but you'll at least give yourself a chance to stay away from a falling knife. You could buy at $40 thinking you're getting a deal, while it continues to grind all the way down to $30. Better to wait till a bounce to $35 and know that you're bailout point is below $30. It may take a few times of getting stopped out before you find the true bottom, but you'll have managed your risk at least.  Worst thing you can do is buy at $40 and watch it drop to $20 and then feel stuck.

acroy

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Re: Recent Oil Prices
« Reply #32 on: August 14, 2015, 08:17:12 AM »
I invest about $2k per month in Vanguard, whatever ETF is most beat up at the moment. Recently, energy & utilities. Buy cheap baby!!

nereo

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Re: Recent Oil Prices
« Reply #33 on: August 14, 2015, 08:17:40 AM »
Oh, and I don't really care for buying in a slow, grind down. You never know how long that grind will last. I'd rather see some sort of bottom happen. That means you won't ever catch the absolute low, but you'll at least give yourself a chance to stay away from a falling knife. You could buy at $40 thinking you're getting a deal, while it continues to grind all the way down to $30. Better to wait till a bounce to $35 and know that you're bailout point is below $30. It may take a few times of getting stopped out before you find the true bottom, but you'll have managed your risk at least.  Worst thing you can do is buy at $40 and watch it drop to $20 and then feel stuck.

so - how do you tell when it's a 'bounce' and that it won't stay at that price (or fall back slightly) for years? 
knowing that seems to be the real trick...

hodedofome

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Re: Recent Oil Prices
« Reply #34 on: August 14, 2015, 10:48:19 AM »
so - how do you tell when it's a 'bounce' and that it won't stay at that price (or fall back slightly) for years? 
knowing that seems to be the real trick...

Well, there's a certain price that will prove to be the bottom. We just have no idea what price that will be. However, if we wait for a bounce, then we have a tradeable low to trade against. If it goes to $40, then back up to $45, then we can buy at $45 and know that if it trades below $40 then we bail out. If it stays at $40-45 for a long time, well then that's the risk you take. But IMO it's better than buying here and watching prices get cut another 50% and then not knowing what to do.

If we were talking about the entire market, then you could dollar cost average down and, barring the entire economy peaking for good, expect that prices will go back up due to the entrepreneurship of the US. However, when we're talking about oil prices here, there's no law that says prices have to go back to $100. Technology could keep the price low for a long, long time. But that's just me.

BTDretire

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Re: Recent Oil Prices
« Reply #35 on: August 17, 2015, 05:05:03 PM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).


 I made a highly speculative bet last Thursday, already down 3%.
1000 shares of UWTI, a 3X leverage oil play.

gReed Smith

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Re: Recent Oil Prices
« Reply #36 on: August 18, 2015, 07:17:30 AM »
I made a highly speculative bet last Thursday, already down 3%.
1000 shares of UWTI, a 3X leverage oil play.

You know that old Jack Bogle chestnut, "If your investment doesn't have significant gains in 5 days, sell and try something else."

And Warren Buffet: "A prudent investor should be gaining on every investment by mid-week of the following week, or else he should sell and buy into a riskier asset to regain his losses." I think that's paraphrasing a Benjamin Graham quote, though.

PARedbeard

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Re: Recent Oil Prices
« Reply #37 on: August 18, 2015, 12:12:19 PM »
There are so many reasons why oil should be cheap now. Honestly, I think it will probably go a bit lower. The shale coming out of the US and Canada, combined with a Chinese slowdown and both Iran and OPEC's output makes me think that cheap oil may hang around for a bit. That being said, cheap oil means (to me at least) that alternative technologies will be put on the backburner until they are more financially viable.

Now, many techs are viable now and not widely implemented, so there may be a few chinks in my Big Oil chainmail, yet I believe that oil companies will rebound hard in a few years' time. That time scale, though, may take a few of the smaller shale producers with it.

With the yields and future potential so high, I have been putting very small amounts in RDS.B and BP for long-term holdings.

BTDretire

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Re: Recent Oil Prices
« Reply #38 on: August 19, 2015, 01:31:18 PM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).


 I made a highly speculative bet last Thursday, already down 3%.
1000 shares of UWTI, a 3X leverage oil play.
How to turn $1070 into $940 in just 7 days!
Oil is down to $40.80 at close on 8/19.
When your time comes,
 A less speculative way to play oil is a Vanguards ETF, named VDE.
Top ten holdings are
1         Exxon Mobil Corp.
2         Chevron Corp.
3         Schlumberger Ltd.
4         Kinder Morgan Inc.
5         ConocoPhillips
6         Occidental Petroleum Corp.
7         Phillips 66
8         EOG Resources Inc.
9         Anadarko Petroleum Corp.
10         Williams Cos. Inc.

spud1987

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Re: Recent Oil Prices
« Reply #39 on: August 19, 2015, 03:51:16 PM »
I just bought $2k in an oil major's LEAP call options that expire in 2017. This is a highly speculative bet that oil will stabilize and slightly recover by 2017. Some of these oil majors are trading at book value (meaning they are worth as much as their underlying assets upon liquidation).


 I made a highly speculative bet last Thursday, already down 3%.
1000 shares of UWTI, a 3X leverage oil play.

I was up 40% at the end of last week and now I'm back to even. Should've sold! ;)

I suggest ignoring day to day moves for these highly speculative bets. I don't plan on selling my call options until next year when oil prices have (hopefully) recovered somewhat.

forummm

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Re: Recent Oil Prices
« Reply #40 on: August 21, 2015, 02:06:34 PM »
First of all recognize that this is a speculative move. Then determine how much money you can afford to speculate with. Then come up with a systematic approach that a) you can follow and b) increases your chances of making money.

I have traded speculated in oil this year. My approach was start a small position in a long oil etf when oil crossed under $50/barrel. I would then double up my position if it crossed under $47.5. I would then double up again if it crossed under $45. I would then sell my etf and by UCO, which is 2x leveraged, if it crossed under $42.5. I would then sell UCO and buy UWTI, 3x leveraged, if it crossed under $40 a barrel. My exit strategy was to sell once the price of oil was $10 higher than than when I initiated. Notice that if oil drops below $40 a barrel I have no more fuel to throw on the fire and could very well lose a significant portion of what was invested. That is why this is speculative. I am comfortable with it because I don't see it dropping significantly below 40 for any significant length of time, but you have to recognize it as a possibility and substantial risk.

As you can see, this is clearly a speculative endeavor. I am NOT recommending you do this. I posted this to show the kind of process you need and that it would make most people realize how risky it is. It made good money back around March and April, and I am starting to build exposure to it again.

The other thing, most people don't have much money that they can categorize as "speculative". If you used my methodology, your initial trade would only be 1/4th of your speculative money (because you would double to 1/2 at 47.5 and double to all in at 45). So if you only have less than 10k as "speculative money" then this probably isn't worth your time either.

I don't know you, but I would recommend to 99.99% of people to not try this. I am very comfortable with investment risk. Most people aren't. Most people feel the pain of losing $1 is equivalent to the happiness of gaining $3. So most people should focus on taking an appropriate level of risk and minimizing fees.

Was reminded of this post when I saw oil was down to $40 today.

hodedofome

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Re: Recent Oil Prices
« Reply #41 on: August 22, 2015, 11:38:37 AM »
Yup. The market can remain irrational longer than you can remain solvent. Always have an exit strategy where you say 'what will I do if the market proves me wrong?'

JetBlast

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Re: Recent Oil Prices
« Reply #42 on: August 23, 2015, 10:18:06 AM »
There are so many reasons why oil should be cheap now. Honestly, I think it will probably go a bit lower. The shale coming out of the US and Canada, combined with a Chinese slowdown and both Iran and OPEC's output makes me think that cheap oil may hang around for a bit. That being said, cheap oil means (to me at least) that alternative technologies will be put on the backburner until they are more financially viable.

Now, many techs are viable now and not widely implemented, so there may be a few chinks in my Big Oil chainmail, yet I believe that oil companies will rebound hard in a few years' time. That time scale, though, may take a few of the smaller shale producers with it.

With the yields and future potential so high, I have been putting very small amounts in RDS.B and BP for long-term holdings.

I have taken a similar strategy. I already had BP in my portfolio, so I looked at the other majors and while RDS was interesting I wound up choosing XOM for a few reasons. I set up the direct stock purchase plan through computershare about a month and a half ago and on the first of every month I automatically buy a set dollar amount of XOM commission free. The plan is to keep the buying schedule for a year unless oil prices really spike (I doubt this will happen). I intend to keep the shares I accumulate for decades.

hodedofome

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Re: Recent Oil Prices
« Reply #43 on: August 31, 2015, 11:52:16 AM »
IF I was looking for the bottom in oil (which I'm not), this is an area I'd be looking to get in. The lows at the beginning of 2015 was in the $45 area (west texas intermediate). It bounced up to $60 and then went back down, slicing right through $45. It went down to $37.75 and has now violently bounced up the past 3 days to $48. The market decided it didn't like being down that low, at least for now. Do I think this is the bottom? No way to know for sure. But it at least gives you the chance of buying near the lows, with the option of bailing if it trades below $37 in the future (cause you never know how far down it can really go).

Obviously I wouldn't be buying USO or any of that crap, it would be XLE, VDE, OIH...stuff like that.

Also, look at DWTI (3x leveraged inverse crude ETF). A high of $236.65 1 week ago, $98.72 today...lol

hodedofome

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Re: Recent Oil Prices
« Reply #44 on: August 31, 2015, 02:13:59 PM »
FWIW I shorted USO at the close today for a short term mean reversion trade. Risking only .25% of my account.

BTDretire

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Re: Recent Oil Prices
« Reply #45 on: August 31, 2015, 02:37:06 PM »
[
 I made a highly speculative bet last Thursday, already down 3%.
1000 shares of UWTI, a 3X leverage oil play.
How to turn $1070 into $940 in just 7 days!
Oil is down to $40.80 at close on 8/19.
[/quote]

With UWTI I was down 40%, now I'm up 38%.
My $1070 is now $1430, what will tomorrow bring?
Oh, already down in after hours trading.

Financial.Velociraptor

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Re: Recent Oil Prices
« Reply #46 on: August 31, 2015, 06:07:01 PM »
Baker Hughes Rig Count for domestic rigs went up despite weak oil prices.  *Somebody* out there has found a way to be profitable below $50.  Could mean long term price is in the 40s instead of the 50s.

hodedofome

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Re: Recent Oil Prices
« Reply #47 on: August 31, 2015, 07:46:37 PM »
You would figure that if oil stayed low, people would find a way to waste more gas buying SUVs until the price went back up again. Us Americans are a wasteful bunch.


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SpiritualGangsta

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Re: Recent Oil Prices
« Reply #48 on: August 31, 2015, 10:01:13 PM »
Just skimmed this thread, so I apologize if I missed something.. however one of the better oil plays I have come across is a long-term bet on the Norwegian ETF NORW.

It pretty much traces XLE, except its' yield is double.. furthermore it doesn't have exposure to over-leverged frackers.
Also, NORW is sporting a PE of 12.. while XLE is sporting a PE of 22.

The ETF is getting hammered due to low oil combined with a strong dollar.. so really you have two ways to profit, on top of the 7% yield (paid once annually).

I picked up 1000 shares in the low 10's... it's currently at $10.92.. I plan to add more to my stake on another pullback.

http://finance.yahoo.com/q?s=NORW


alsoknownasDean

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Re: Recent Oil Prices
« Reply #49 on: September 01, 2015, 05:37:44 AM »
Yeah, I kinda bought in at the wrong time.

I bought an Australian oil ETF in late June at $28.35. It went as low as $17.59 in the last week and a bit's ructions, and is now at $21.75 :)

https://au.finance.yahoo.com/q?s=OOO.AX&ql=0

I'd rather wait until I've got a bit more cash behind me before doing a purchase, but at $18 I was rather tempted.

I guess here in Aus we've got the added factor of a weakening $AUD.

The other thing of course is the realisation that I would gain more from high oil prices through my investments than I would end up paying at the pump (although I've seen between $0.97 and $1.50 a litre this year).
« Last Edit: September 01, 2015, 05:41:20 AM by alsoknownasDean »