Australian (ASX) Stock Market Forum

Crude Oil price

Jump to new
The market tends to auction toward last agreed value. The high volume nodes or points of control tell where value was most agreed upon. 81.12 is the last untested point.
 
CanOz said:
Just a year or so back and the world was awash in oil. What's changed?
Click to expand...

Ran out of gas? :D

From memory, the "glut" was about 2m or less barrel a day. That sounds like a lot but that's about 2% over supply of demand.

Once you crash the price, put small operators out of business; put a halt to investment in more energy efficient machineries, halt new investment into alternatives... drive more demand of the good stuff by diverting their need for someone else's green energy.

Further at low prices, small oilers need to pump more out to break even or not go broke... that in itself quicken the depletion.

On top of that... the new increased demand and fossil burning also soften up the Arctic, giving easier access the last drop God giveth (hidden from?) to man....

Then once you're ready to make the killing, prices will be so high that those hippy tree hugging greenpeace terrorists will find little moral support or funding to make any noise.
 
What's the point? NYMEX CL price right now is like in between of low(20+) and high(150). Better buy near the low and sell near the high. My 0.02.
 
Plus long crude oil basically equals betting on overheating of global economy. My personal view is the odds of that is not really meaningfully high. my 0.02.
 
tobeyhw said:
Plus long crude oil basically equals betting on overheating of global economy. My personal view is the odds of that is not really meaningfully high. my 0.02.
Click to expand...
True

But i think there are good arguments that there will be an 8 in front next year
 
There are many elements that affect the price, current and future supply and demand, the USDX...makes for great intraday volatility. I’m not fussed where it’s going, only that it’s moving.
 
How do you know when oil is cheap or expensive?

Stocks are so much easier. You could look at Price to Earnings or something like this.

Does anyone have a ratio for oil equivalent to Price to Earnings?
 
Trading Athlete said:
How do you know when oil is cheap or expensive?

Stocks are so much easier. You could look at Price to Earnings or something like this.

Does anyone have a ratio for oil equivalent to Price to Earnings?
Click to expand...

Formula is Value = Oil Price / eE

Where eE is earning Expectation. i.e. what much the buyer is expecting to make from the price.

So if oP/eE <1, it's good to buy.

:D


--------

PE doesn't really tell you much about the value/price of the business. It just give you an idea of what the market is thinking/expecting. And even then, it doesn't really tells much more than a wet finger in the wind.

So if PE is "high"... it indicate that the market is expecting the E in the future to be higher, thus bringing the PE ratio down to a more "reasonable" level. i.e. they're buying it for cheap given what they see the future will be.

But then what is cheap and what is reasonable? We all have our different ideas of it... What is that exepcted E and when do we, the market, know it's been reached? Did anyone send a memo about it?

So if you're to rely on PE ratio, you will still need to know for yourself what your E is. And that's assuming that P is the current market price.


Should price it in two ways...

1. Perpetual bond..... Value = Earning Power/rr.... where rr is your required rate of return, say 10 or 15%p.a. from now into eternity.

You work out, under a few scenario and assumptions, what you reckon the company's earning is likely to be for you as the owner taking over the entire company.

Plug in that EP, divvy it over your rr... that's about how much a reasonable price is.

If Mr. Market is offering lower than that... all else being equal... you strike a deal.

2. Ben Graham's estimation.

Value = EP * [8.5 + 2g]

where g is the expected p.a. growth rate over next decade.


So valuation is pretty simple and straight forward. If you find you're doing too much maths to value the business, you're doing it wrong. Modesty, I know.

The difficult and most challenging part is not the valuation... it's in the understanding of the business.

How to judge its financial position; can the business maintain its market share/position; grow without too much risk; shifting tastes, technological changes etc. etc.

All that is to ensure that you can somewhat get the estimate of its earning power within the ball park.

Then there's the little to no debt.

Some leverage is good and expected. Some debt are good... some will kill the business. At a certain leverage ratio, you're just playing with fire... or rather, the management is playing with fire.

How are you going to have any clue where interest might be over the next decade, or into enternity? You can't... so you avoid those with too much debt.

So while it will eventually boils down to a P/E ratio, or any ratio... what lies behind it must be understood else you're going to get hurt and don't know why.



oh, there's also the asset play.
 
samso said:
Am not saying it is easy, but it will cost more to explore and the price will have to follow. That I assume.
Click to expand...

There is another line of thinking that says the industry already has a back log of resources that have already been found, but were never exploited due to being "too Hard", but now with fracking and other new tech, these "resources" are being transformed into "reserves" at minimal cost, not to mention well that were considered "depleted are having their lives extended, or are even being brought back to life in some cases.
 
luutzu said:
Formula is Value = Oil Price / eE

Where eE is earning Expectation. i.e. what much the buyer is expecting to make from the price.

So if oP/eE <1, it's good to buy.

:D
Click to expand...

Hi luutzu,

Thanks for your comprehensive explanation regarding the PE ratio.

I just have a question about your formula: Value = Oil Price / eE

When it comes to oil how would one work out the eE?

Oil is not a company so how would a person work out earnings expectation?

Thanks
 
Trading Athlete said:
Hi luutzu,

Thanks for your comprehensive explanation regarding the PE ratio.

I just have a question about your formula: Value = Oil Price / eE

When it comes to oil how would one work out the eE?

Oil is not a company so how would a person work out earnings expectation?

Thanks
Click to expand...

Sorry man, I was just pulling a bad joke. :D
 
We actually have an accepted method for establishing what the price of CL should be.
 

Similar threads

ducati916
April DDD
3 4 5
Replies
98
Views
7K
ducati916
ducati916
ducati916
May DDD
2 3 4
Replies
69
Views
5K
qldfrog
qldfrog
ducati916
DDD March 2024
2 3
Replies
47
Views
4K
ducati916
ducati916
ducati916
November DDD
2
Replies
31
Views
2K
ducati916
ducati916
TiminOz
The dynamics of money and TIME: crimping cashflow for a period
Replies
3
Views
445
TiminOz
TiminOz
Top