Oil price discussion and analysis

[wayneL]

Re: OIL AGAIN!

Gentlemen,

You know i have my money on $150.00 oil, but, the way i see it is that you just trade the trend no matter which way it goes whether you are buying/selling commodities or equities.

You have to be bonkers to get in the way of a strongly trending commodity or equity thinking you can pick the top or bottom. I would have thought it would be much wiser to go with the trend with a trailing stop loss then once you get closed out wait for the market to clearly show you it has reversed then go short and ride the opposite direction.

Well, thats my plan. If you take profits along the way and slowly reduce your holdings as the price rises you put yourself in an even stronger position and reduce your risk.

Obviously oil will take a breather or have a reversal at some time but i thought that with very strong trending patterns the biggest push is always just before the reversal. If thats the case then oil should run further and stronger before it reverses.

So my opinion is that you should be long with a trailing stop until it clearly shows you it has reversed the trend, then just go short?

Regardless of what the bears are saying the price is still rising, i will get off when it is clearly falling.

Seems logical to me.........................

Absolutely.

But fundamental ruminations and technical trading can be be at odds with each other... in other words, just discussion here. So far this year, probably 80% of my trades have been against my fundamental opinion (clearly, the majority disagree ).

So "Never fight the tape", is the best opinion... in my opinion.

 

[MRC & Co]

Re: OIL AGAIN!

If you take profits along the way and slowly reduce your holdings as the price rises you put yourself in an even stronger position and reduce your risk.

Obviously oil will take a breather or have a reversal at some time but i thought that with very strong trending patterns the biggest push is always just before the reversal. If thats the case then oil should run further and stronger before it reverses.

Or you can pyramid into more positions as it goes your way, helps also to decrease risk, and dramatically increase reward!

This could well be the biggest push, oil has gone para lately! But that, you never know.

Just ensure you have your stop trailed as you say, which is the hardest part of the entire game IMO!

 

[rederob]

Re: OIL AGAIN!

The reasons for contango/backwardation are not always straightforward and/or transparent, that's why I posted the bearish trader's view. I don't know whether it's bullish or not, but worth highlighting anyway.

A similar trend has been occurring in the aluminium market.
There is plenty aluminium.
There is plenty oil.
The forward costs of production for aluminium are responding to the price of energy.
The cost of energy is also responding to energy costs. That is, nobody sees these costs as decreasing into the future, so the unit cost of extraction must increase and is reflected in futures contracts.

The oil trader's comments on refinery capacity and Iranian crude storage were furpheys. US refineries are not running at capacity because they cannot extract a reasonable price margin on the finished ("cracked") product. That is, refineries are refusing to crack crude at a loss. Meanwhile, the quantity of crude that Iranian tankers could store (if they are indeed storing any\much) will have no impact on present prices: The US goes through 10 supertankers of oil per day.

There is little doubt that oil MUST correct.
The questions of relevance are when, and by how much.
My vested interest lies in a good sum of money waiting in the wings for " fair value" to return to the underlying oil equities I typically invest in.

Closing remark: Oil now traded over $130 for a few hours without let up.

 

[michael_selway]

Re: OIL AGAIN!

Gentlemen,

You know i have my money on $150.00 oil, but, the way i see it is that you just trade the trend no matter which way it goes whether you are buying/selling commodities or equities.

You have to be bonkers to get in the way of a strongly trending commodity or equity thinking you can pick the top or bottom. I would have thought it would be much wiser to go with the trend with a trailing stop loss then once you get closed out wait for the market to clearly show you it has reversed then go short and ride the opposite direction.

Well, thats my plan. If you take profits along the way and slowly reduce your holdings as the price rises you put yourself in an even stronger position and reduce your risk.

Obviously oil will take a breather or have a reversal at some time but i thought that with very strong trending patterns the biggest push is always just before the reversal. If thats the case then oil should run further and stronger before it reverses.

So my opinion is that you should be long with a trailing stop until it clearly shows you it has reversed the trend, then just go short?

Regardless of what the bears are saying the price is still rising, i will get off when it is clearly falling.

Seems logical to me.........................

The thing is sometimes with shares like BKN, AED and many others, share price can drop 40% in one day (stop loss wont work)

It all comes down to risk/reward, or what you percieve the risk/reward are when you buy or sell a stock at any given time

thx

MS

 

[nizar]

Re: OIL AGAIN!

The thing is sometimes with shares like BKN, AED and many others, share price can drop 40% in one day (stop loss wont work)

Like in life, there can be, and is, no guarantees in the markets.

Those who bought BKN based on earnings, or management, or whatever it is they looked at, ALL WOULD HAVE copped the 40% loss.

These black swan events happen to even the very best traders, the key is to be able to survive them.

And this actually has nothing to do with risk/reward.

 

[Whiskers]

Re: OIL AGAIN!

Another view fwiw (for interest sake):

Quote:
I was an oil trader...


We also know that real physical oil demand in the US is below that of last year. High prices are doing their work - creating a slump in demand at the same time as new capacity is being brought on the market.

I saw and posted an article somewhere a few months ago about huge oil-sand deposits in Canada gearing up production. I wonder if this is the new capacity he is talking about.

I recall they were producing well over 1m barrels per day from reserves of something like the Saudi's... I think it was over 700 billion barrels and increasing.

Recent reports are indicating that the available oil-sand leases are just about all taken up, the big players are moving in and that exponential production increases are likely over the next few years. Some weeks ago production was estimated to increase to 4m bpd by abt 2020. Given that production started there at much lower prices... I think more like $40... if prices remain at these levels, I would imagine production could and would be geared up more quickly.

The US consumption has fallen close to 1m bpd in the last year and from reports consumers and airlines are cutting back trips and flying time. Quite probably demand destruction setting in. If the yanks get serious about oil conservation and ditch their gas guzzlers for fuel efficient smaller fours, and with more fuel efficient aircraft coming on stream and if they got out of Iraq, they surely could easily cut their demand by another 2 or 3m bpd, back to maybe 17m bpd... that would be a decrease of about 20%.

Then if Canada's oil-sands produced 3 to 4m bpd in a few years , not counting any other new supplies, that would be getting near 20% of US consumption

So if high prices are driving exponential development of non OPEC sources, alternatives to oil and demand destruction... what is the likely outcome?

Well if nothing else, a weakening of OPEC's cartel.

Apparently they have large oil and gas reserves off the 85% of their coastline that congress has banned from drilling. Cuba in partnership with China are drilling closer to the US coast than the US is. http://www.chron.com/disp/story.mpl/editorial/outlook/5793614.html

Then there is the large national parks in Alaska that reportedly contain oil.

The US just isn't that desperate yet... and I doubt OPEC would want to push them that far.

I believe there is still a slight excess supply over demand even as the US slowly builds reserves which leads me to also believe this is something of a speculative/panic driven oil price bubble which will burst soon.

 

[Tysonboss1]

Re: OIL AGAIN!

I saw and posted an article somewhere a few months ago about huge oil-sand deposits in Canada gearing up production. I wonder if this is the new capacity he is talking about.

I recall they were producing well over 1m barrels per day from reserves of something like the Saudi's... I think it was over 700 billion barrels and increasing.

Recent reports are indicating that the available oil-sand leases are just about all taken up, the big players are moving in and that exponential production increases are likely over the next few years. Some weeks ago production was estimated to increase to 4m bpd by abt 2020. Given that production started there at much lower prices... I think more like $40... if prices remain at these levels, I would imagine production could and would be geared up more quickly.

The US consumption has fallen close to 1m bpd in the last year and from reports consumers and airlines are cutting back trips and flying time. Quite probably demand destruction setting in. If the yanks get serious about oil conservation and ditch their gas guzzlers for fuel efficient smaller fours, and with more fuel efficient aircraft coming on stream and if they got out of Iraq, they surely could easily cut their demand by another 2 or 3m bpd, back to maybe 17m bpd... that would be a decrease of about 20%.

Then if Canada's oil-sands produced 3 to 4m bpd in a few years , not counting any other new supplies, that would be getting near 20% of US consumption

So if high prices are driving exponential development of non OPEC sources, alternatives to oil and demand destruction... what is the likely outcome?

Well if nothing else, a weakening of OPEC's cartel.

Apparently they have large oil and gas reserves off the 85% of their coastline that congress has banned from drilling. Cuba in partnership with China are drilling closer to the US coast than the US is. http://www.chron.com/disp/story.mpl/editorial/outlook/5793614.html

Then there is the large national parks in Alaska that reportedly contain oil.

The US just isn't that desperate yet... and I doubt OPEC would want to push them that far.

I believe there is still a slight excess supply over demand even as the US slowly builds reserves which leads me to also believe this is something of a speculative/panic driven oil price bubble which will burst soon.

I would think we would need all of the factors you mentioned just to maintain oil price in the low $100's,... Even with the ramping up of oil sands the fact that conventional oil is declining willbe offsetting any extra production from the oil sands,...

I would hate to see oil sands mining become wide spread, it's just to destructive, open cut strip mines scar the earth for to long.

 

[Aussiejeff]

Re: OIL AGAIN!

"Oil Companies Say Prices Should Be $35-$90 a Barrel"

Who is pulling who's big foot????

Link to a good laugh... http://www.bloomberg.com/apps/news?pid=20602099&sid=actpv8pjkuWQ&refer=energy

 

[ShareIt]

Re: OIL AGAIN!

"Oil Companies Say Prices Should Be $35-$90 a Barrel"

Who is pulling who's big foot????

Link to a good laugh... http://www.bloomberg.com/apps/news?pid=20602099&sid=actpv8pjkuWQ&refer=energy

Iran could be behind all this.... if you think about it, higher prices weakens the US.... US is talking up a military strike on Iran (actually, whispering)... US most likely won't take action with prices already this high... oil is a very strategic play, but prices will pop

 

[Whiskers]

Re: OIL AGAIN!

I would hate to see oil sands mining become wide spread, it's just to destructive, open cut strip mines scar the earth for to long.

Yes, that is one of the issues slowing approval of some projects apparently.

But an insitue extraction method involving pumping steam into the deposit to melt the oil seems very sustainable, but this method relies on enough depth and suitable cover to trap in the steam and currently is the minor part of production.

Also Qld has considerable shale oil deposits. The Qld gov has previously said some estimates put reserves well over 20 billion barrels and potential production at 1m bpd. While greenpeace claimed credit for shutting down the Southern Pacific Petroleum project a couple of years ago, I believe this project is under consideration for revival by new owners and another using new technology near Julia Creek is considering an IPO soon.

 

[Tysonboss1]

Re: OIL AGAIN!

Iran could be behind all this.... if you think about it, higher prices weakens the US.... US is talking up a military strike on Iran (actually, whispering)... US most likely won't take action with prices already this high... oil is a very strategic play, but prices will pop

USA is still fighting in iraq and afganistan,..... forget about a strike on iran till it has cleaned up it's current mess in those two wars,...

 

[haunting]

Re: OIL AGAIN!

Then, apparently to make sure the way was opened really wide to potential market oil price manipulation, in January 2006, the Bush Administration’s CFTC permitted the Intercontinental Exchange (ICE), the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of US crude oil futures on the ICE futures exchange in London – called “ICE Futures.”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/22/ccoil122.xml

- Oil's perfect storm set to blow over. The following para catches my eyes, 2006 it seems is when it all started, with energy speculation mostly increased 3 times over since.

Lehman's latest report - Is it a Bubble? - says commodity index funds have exploded from $70bn (£36bn) to $235bn since early 2006. This includes $90bn of fresh money. Energy takes the lion's share. Every $100m flow of investment money into oil lifts crude prices by 1.6pc, it said.

 

[Temjin]

Re: OIL AGAIN!

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/22/ccoil122.xml

- Oil's perfect storm set to blow over. The following para catches my eyes, 2006 it seems is when it all started, with energy speculation mostly increased 3 times over since.

Lehman's latest report - Is it a Bubble? - says commodity index funds have exploded from $70bn (£36bn) to $235bn since early 2006. This includes $90bn of fresh money. Energy takes the lion's share. Every $100m flow of investment money into oil lifts crude prices by 1.6pc, it said.

That's what happens when central banks is flushing the economy with more bail-outs and free credit in an attempt to pop up the market, only to realise that the money is being flown to the commodity markets instead.

 

[ithatheekret]

Re: OIL AGAIN!

No I don't think so , more down the line of where ever whenever we'll make a profit from you ................. sounds a bit like a Blooomberters ad .

I'm sticking with my projections and they're only based on a phase one catalyst at present .

Dr. Nelson has come out with an excise cut .... whooo fknhooo stuff 2 years too late and 2 years too early ,

Mind you I think the sun shines out his .........

If I were a sober and astute investor I'd be buying the dips , but at present I'm too pissed to give a ....

But even though the State has paid for my nights entertainment , I'm more than certain that oil will achieve a price average of $140 pb ....... actually $142.80 , so IMHO $120.60 -$142.80 will see us out until 2014 at least in the median range ...... unless the unexpected pops up and chits all over my calculations .

Margins will be protected ! The rest is in our Lords hands .......... apologies to our athiest members , but the pri.ks keep shifting the goal posts , the more they shift them the closer $200 will get !

 

[ShareIt]

Re: OIL AGAIN!

$5 dollar drop and counting, no bounce off the $130 mark.... channel 10 news dedicates 10 min of their late edition to oil, time to take profits... but caution still needed

 

[JeSSica WaBBit]

Re: OIL AGAIN!

Na, still long on oil Shareit.

$5.00 drop in the scheme of $130.00 is not a sign of a reversal, you'll just have to keep your fingers, toes, arms and eyes crossed it goes down as you want, but, i reckon your wrong and $150.00 is on the cards.

Maybe you would also like to put a carton of beer on your prediction, i need to stock up the fridge and i'm long on beer futures at the moment and looking to take further positions.


JW

 

[MRC & Co]

Re: OIL AGAIN!

How are you trailing your stop Jessica and which instrument are you invested through?

I'm 'hoping' for a retracement, I was thinking something more than 5 dollars, but it's back up a little as I type.

 

[JeSSica WaBBit]

Re: OIL AGAIN!

I dont have a trailing stop set on my shares at present because i do not believe we are anywhere near the top of this bull run. Thats how confident i am that my Cue Energy Resources have only just commenced their run.

My profit is large enough tp take a correction if it was to happen, the money is all mine so i am under no pressure to sell. No need for a trailing stop for me because at present i think it is more of a risk and i am doing well with my discretional trades.

I could be wrong but i am backing myself, so far i have been correct and i am confident that i am right at present. If i am wrong i will wear it on the chin.

I think that China and India will grow quicker than expected and with it will come massive oil demand. I dont think people realise the scale of these countries as they evolve and westernise, lots of people and lots of demand.

The American economy and dollar looks nasty, so hedging against it buying oil looks likely to continue. The funny thing is, when they do turn around their economy, oil dmand will increase............ironic.

Sentiment, i think speculators want oil to go to between $150 -200, whether it is justified is irrelevant, if enough people think it will reeach these prices it will reach it.

The Saudis, can they actually pump more oil, got my doubts, i reckon its all smoke and mirrors. Just wait untl they say, sorry we just cant pump any more oil and our reserves are declining quicker than we realised. Oh dear, we will have a problem.

Its not an infinate resource. People need to change their thinking, its not that oil is expensive, it is that it has been way too cheap for way too long. Start thinking like that and its a different picture.

But, if i was entering new positions at the moment i would put on a trailing stop, where and at what level depends on your individual situation and level of acceptable risk.

I would most likely set different stops as i pyramided into the market. Hard question to answer because there are many different answers and it depends on your own circumstances.

as for the high of oil before it turns, time will tell.


JW

 

[MRC & Co]

Re: OIL AGAIN!

My profit is large enough to take a correction if it was to happen, the money is all mine so i am under no pressure to sell.

But, if i was entering new positions at the moment i would put on a trailing stop, where and at what level depends on your individual situation and level of acceptable risk.

Same difference, no? Either way, you are loosing your own money! Whether that be money you have earnt at work, or money made in the markets........

It appears you are more looking at long-term fundametals of oil and investing (which is also a very good idea IMO), as opposed to trading.

I gather by your reply, you are exposed to oil through direct shares? Not through an ETF or futures contracts? More prone to equity movements, for better or for worse.

 

[michael_selway]

Re: OIL AGAIN!

Like in life, there can be, and is, no guarantees in the markets.

Those who bought BKN based on earnings, or management, or whatever it is they looked at, ALL WOULD HAVE copped the 40% loss.

These black swan events happen to even the very best traders, the key is to be able to survive them.

And this actually has nothing to do with risk/reward.

Nono, not only earnings but the price you pay for those earnings, its called expected return

some companies have great earnings, but there is a certain price you should pay for it otherwise, its nto worth buying (i.e. risk/reward)

thx

MS