Ok, I was expecting a thread on this. WTF $108 bbl oil? Come on…this is ridiculous. I have been about as bullish (long-term) on commodities as anyone, but I can’t justify this sort of run-up. That being said, where does this go from here? I don’t see how a US (and perhaps some other countires) recession and global slowdown is condusive to energy demand in the short and medium term. Do we have any expert opinions???
Peak oil!!!
One of the BB’s put a $150-200 PT on it today…conveniently, there was no timeline provided.
Tell you the truth most energy analysts even have no idea what to do with this market right now, there is alot of reasons out there but no one is banking on any. I mean we also have $10 NG. Coal has been on such a bull-run lately. For instance in the NG world, China/Asia is receiving basically almost all the LNG out there, but no one has hardcore facts/figures on what is China’s energy demand, or a better question how is the margin unit of energy calculated (or fundamentals behind it). You have a similar story in Crude, but with alot of more geo-political noise. Some attribute the fire at the refinery in Texas for what got us over $100. But how could such a small factor keep the price of oil rising? Because oil like most other commodities is traded at the margin based on LT outlook, if the slightest problem can occur it forces up several dollars, because its not at a certain point “end-users” in china will stop buying oil. Add this to that everyone is expecting OPEC to slow to lower production once this global recession hits full frontal, so while Demand will go down, expect Supply go down as well. Add in the US dollar falling like no tomorrow. Add in we just had a record cold winter in most of the world (again affecting China bigtime) and most of the NE and Midwest US.
I don’t know much about the oil market, but I think I may take a short spread bet on it, predicated on the fact that I believe OPEC used to worry about oil substitution above $60 and they have presumably spent more time analysing the market than anyone.
What is the best way to short oil in a p.a.? At work Goldman pitched us some far out of the money puts that were trading at about $0.30, but that is only for institutional portfolios. If I want to do the same in a p.a., what options do I have?
I agree on the long-term fundamentals as much as anyone, but I just can’t rationalize $108 bbl oil. I’d short it until it gets back to $90.
I think $100 is likely to be a resistance level on the way down. If you short now, I’d have a target cover price around 101 or so.
jrumph Wrote: ------------------------------------------------------- > What is the best way to short oil in a p.a.? At > work Goldman pitched us some far out of the money > puts that were trading at about $0.30, but that is > only for institutional portfolios. > > If I want to do the same in a p.a., what options > do I have? Uh, short futures contracts? If you can’t afford to short futures contracts, you shouldn’t be playing this game. There’s a reason they are sized that way. Going short oil right now because you think it’s just too high is really f-ing stupid. It really amazes me when someone asks what kind of securities should they use to place a bet when the question of how is vastly easier than the question of why. Honestly, if you can’t think of all the ways of placing the bet, you haven’t studied the situation enough so you shouldn’t be placing the bet. You need to learn to be your own risk manager and stop yourself from doing this stuff.
Yeah, I agree that I don’t think oil is likely to be coming down for a while and I wouldn’t make that bet myself. My only point is that if it does come down, I highly doubt it’s going to 90, and that you’d probably want to cover at just above 100, based on the idea that previous resistance levels become future support levels, and vice versa (I think I said “resistance” in an earlier post when I should have said “support”). I think crossing 100 just made a lot of people rethink their oil positions and reset target prices and the rise now is happening as people implement these revised views. Oil will at some point overshoot what is justified by supply and demand, but the problem of figuring out just what price is justified by supply and demand is pretty nebulous, which is why I’d use more technical analysis techniques than fundamental ones on this commodity.
JoeyDVivre Wrote: ------------------------------------------------------- > jrumph Wrote: > -------------------------------------------------- > ----- > > What is the best way to short oil in a p.a.? > At > > work Goldman pitched us some far out of the > money > > puts that were trading at about $0.30, but that > is > > only for institutional portfolios. > > > > If I want to do the same in a p.a., what > options > > do I have? > > Uh, short futures contracts? > > If you can’t afford to short futures contracts, > you shouldn’t be playing this game. There’s a > reason they are sized that way. > > Going short oil right now because you think it’s > just too high is really f-ing stupid. It really > amazes me when someone asks what kind of > securities should they use to place a bet when the > question of how is vastly easier than the question > of why. Honestly, if you can’t think of all the > ways of placing the bet, you haven’t studied the > situation enough so you shouldn’t be placing the > bet. You need to learn to be your own risk > manager and stop yourself from doing this stuff. JDV, I could be wrong, but you sound like the kind of guy that would have been buying tech in 1999. I (or someone else) might have been on here asking what the best way is to short tech and you would probably have been saying “don’t be stupid, you just haven’t studied the situation enough.” Occasionally, familiarity is the enemy of rational decision-making. I would happily short copper. Why? Well, I know that the Chilean gov’t has a long-term price assumption of $1.21/lb and presumably they know a thing or two about copper. I also know that the cost of bringing new capacity on-stream is a fraction of the spot price. Both of these arguments seem more sturdy than the myopic arguments I might get from a typical metals analysts about strikes in Peru or China’s demand over the next 18 months.
“DUG” ETF short oil fund. Its leveraged 2Xs so it will be pretty volatile, but best way for a small trader to get that return.
I don’t know what JDV’s positions were on tech in the 90s, but I’ve often wondered what the appropriate strategy is when you know that you’re in the mid-to-late stages of a bubble (like tech, or credit, or China, or Commodities, or tulips, or whatever). On the one hand, if you’re in a bubble, you don’t want to be over exposed when the thing pops. On the other hand, if you’re not in at all, everyone looks like they’re whippin’ yer butt, and that can be bad for keeping client money, and pretty depressing when looking at your own. Any thoughts on this? I don’t think oil is done yet, because I don’t think that China’s demand is driven solely or mostly by export needs to the US, and I don’t think oil is all that elastic in the short term.
To add on the demand situation you must remember that in most of Asia; China and pretty much all Arab states Oil is subsidized to keep prices low for the citizens of those nations. This creates artificially high demand, as its not a free market.
bchadwick Wrote: ------------------------------------------------------- > I don’t know what JDV’s positions were on tech in > the 90s, but I’ve often wondered what the > appropriate strategy is when you know that you’re > in the mid-to-late stages of a bubble (like tech, > or credit, or China, or Commodities, or tulips, or > whatever). On the one hand, if you’re in a > bubble, you don’t want to be over exposed when the > thing pops. On the other hand, if you’re not in > at all, everyone looks like they’re whippin’ yer > butt, and that can be bad for keeping client > money, and pretty depressing when looking at your > own. > > Any thoughts on this? I don’t think oil is done > yet, because I don’t think that China’s demand is > driven solely or mostly by export needs to the US, > and I don’t think oil is all that elastic in the > short term. Perhaps I’m fortunate in working for a house that affords me the luxury of indulging in a slightly puritanical view of the world. If I think something is expensive, I won’t buy it.
adehbone Wrote: ------------------------------------------------------- > To add on the demand situation you must remember > that in most of Asia; China and pretty much all > Arab states Oil is subsidized to keep prices low > for the citizens of those nations. This creates > artificially high demand, as its not a free > market. very interesting point. I’ve heard gas is like 5 or 6 cents a litre or something ridiculous in Venuezala!
That’s “litER,” bud! 
No it’s not. Litres were invented by the French, then misspelled by the Americans
Actually north of the 49th it is “Litre”. Of course that word is of little use state-side as is “Metre”. But since we were referencing Venezuela I used metric. Colour, Defence, and Recognize are other example. Note the British spelling. Normally I adjust, but sometimes I forget too as I’ve been taught to spell a certain way for years.
Yeah, just get your tune up at a “Tire Centre”. (I’m just kidding around. I’m 1/2 canadian mesself, so occasionally write colo(u)rful stuff while sitting on my “Chesterfield”). And in any case, my Canadian gold and oil companies got majorly whacked yesterday. Ouch! But, back to the OIL topic…