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If the oil price does collapse to $20 per barrell then it could be one of the best medium buys in town

(16 Posts)
TDiddyIsaMan Thu 16-Jul-09 15:44:16

..see artcle below. And it is not that difficult to invest small amounts in oil. Just thought that I would share this whilst everyone is getting excited about house prices.

By Grant Smith
July 16 (Bloomberg) -- Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.
A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said.
“The economic situation is not getting better,” Verleger, 64, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”
Crude oil last traded at $20 a barrel in February 2002. Futures were at $61.18 today in New York, having recovered 89 percent from a four-year low reached last December. The Organization of Petroleum Exporting Countries is implementing record supply cuts announced last year in response to plunging consumption.
“OPEC don’t realize the magnitude of the cuts they need to make,” which would total about a further 2 million barrels a day, Verleger added. “Storage is going to become tight. It’s not clear if there’s going to be enough storage available.”

China, Inflation

Oil will average $63.91 in the fourth quarter, according to the median of analyst forecasts compiled by Bloomberg. Crude for December delivery traded at $65.61 today in New York. Prices have rebounded on expectations of a demand recovery, led by China and other developing economies, and concern expansionary monetary policy would stoke inflation and weaken the dollar.
At the other end of the spectrum from Verleger, Goldman Sachs Group Inc. predicted in a report yesterday oil will rally to $85 a barrel by the end of the year, and recommended that clients buy futures contracts for delivery in December 2011.
“China is in a real desperate situation,” said Verleger, who publishes the Petroleum Economics Monthly. “We’re in a situation where U.S. consumers aren’t consuming and Chinese manufacturers get hurt. Economists are looking for growth in all the wrong places.”
Forward contracts for oil have been higher than prices for immediate delivery this year, a situation known as contango, creating incentives to buy crude now and store it. That may end as growing stockpiles make storage more expensive.
“Prices would be much lower today, but for the very large incentive to build inventories,” Verleger said. “You need forward buyers, which we had when people were fearing inflation, but as concerns turn toward deflation” that will no longer be the case.

TDiddyIsaMan Thu 16-Jul-09 15:45:11

barrell barrel

HerHonesty Thu 16-Jul-09 21:14:25

so. how do you buy oil?

TDiddyIsaMan Thu 16-Jul-09 21:20:32

for man in the street:

1) set up account with IG Index or Etrade. Doesn't take long. But the longest expiry oil future and "roll" (renew) it when it expiries (about 6 mths time). Sell it with the click of a button. You will have to put down at least 20pc deposit or so but some people find it easier to understand if the put down the full 100pc as a deposit. can explain more if you are really interest.

2)There is something called an ETF (exchange Traded Future) which is a special purpose company that is set up just to own oil. Youyr broker can buy you shares in this.

I use option 1) above. If you are keen I can email you more detail.

TDiddyIsaMan Thu 16-Jul-09 21:25:39

...But Buy the longest expiry

ABetaDad Thu 16-Jul-09 21:33:10

Well that drop to $20 is my best bet for the future price level. There are crude tankers stacked up all over the planet and demand is collapsing.

I hope it does pretty soon though cause I am short at $70.

ABetaDad Thu 16-Jul-09 21:36:21

TDiddy - by the way I was going to ask.

Did you join recently or did you name change? Also, I guess you work from home like me given our coincident posting habits.

TDiddyIsaMan Thu 16-Jul-09 21:56:08

TDiddy- no i am the poster formerly known as ToughDaddy. God you mean I didn't make an impression before!

You are embarrassing me. I don't work from from blush but i do get a bit distracted at work sometimes.

TDiddyIsaMan Thu 16-Jul-09 21:57:54

That should addressed to AbetaDad and not me obviously- I betrayed a certain narcissism there.

Merrylegs Thu 16-Jul-09 22:01:51

But but but why if barrelled oil is so low, it still costs us so much to buy - I mean REAL oil. For my tank. Not virtual oil. Is 38p a litre today.

ABetaDad Thu 16-Jul-09 22:03:48

I see now. Its all making sense. I did not know you were ToughDaddy. Sorry should have worked that out. blush

Of course I noticed you a lot as ToughDaddy and wondered why I had not seen you about.

As you were.... or indeed are now. grin

Just to be clear, you are TDiddy and TDiddyIsaMan as well?

iheartdusty Thu 16-Jul-09 22:04:21

I haven't got anywhere to keep it. I mean the loft is full, the postman already trips over the bins in the garden, the kitchen cupboards are full...just how much room would a few barrels of oil take up anyway?

hf128219 Thu 16-Jul-09 22:04:42

Tax.

TDiddyIsaMan Thu 16-Jul-09 22:06:47

-The price hasn't dropped yet

-much of the price at the pump is tax so it is not a one for one relationship

-your price experience is smoother as some of your suppliers trade futures to avoid price hikes

-customer behaviour is partly to blame: people force more competition when prices are rising by shopping around VERY much for the lowest priced station. Unfortunately the customer are much more complacent when prices are falling, allowing the retailers to drag their feet.

This is like an A';evl economics question. are you trying to test me?

Merrylegs Thu 16-Jul-09 22:08:58

I meant burning oil. Not petrol. My oil tank is 900 litres
(oo-er missus). Costing me the proverbial arm and leg. A year ago it was half the price.

TDiddyIsaMan Thu 16-Jul-09 22:09:30

ABetadad- yes, that is my trinity. Thought i would soften up name a bit and then people kept asking me if I was a bloke or a ladeee shock

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