OIL anyone?

[optimus25]

With crude prices falling below $50, does anyone else think that there is profit to be made on a near term bounce.

I've been watching iShares OIL since it started trading and its starting to look good to me.

[cryder17]

Ive been watching CNBC for the past week on the matter and experts agree that the prices are facing a plausible drop to 45. The saudis are still standing behind their decision to decline an emergency meeting with OPEC in regards to the falling prices and are confident that there is no reason to worry.

This is what is causing investors to sell off their oil shares. I would wait until there is a little more conflict in relations with the saudies. who knows when this may be... but the next OPEC meeting to even discuss these falling oil prices wont be for a few more months.

[evnp85]

Its a shame that the price of gasoline doesn't reflect the 16% price drop in crude so far in 2007.

[cryder17]

well i always find it a bit daunting that when the price of oil spikes, the pump prices reflect that incident overnight, YET when the prices fall in a similar fashion, the pump prices undergo a gradual decline.

Bastards those gas stations are.

[madcowdisease]

In regards to the gas stations it is well documented. I heard on 700 WLW this morning they cited a study from a reputable source that exactly what we all have witnessed, is indeed fact. Individual station owners raise prices immediately to cooincide with crude's jump, but when crude falls there is a delay until they bring prices down. The study attributed it to human nature. If the guy across the street doesn't lower then neither will his neighbor. Sucks if you ask me.

Optimus, I have been a strong buyer of oils once crude went sub-$55, the day it went in to the $52 range after certain technicals broke down. I'm in SU under $70/share. I'm not so much looking for a short term bounce, though it will happen, rather I am using this opportunity to buy for the next 6-18 months out.

The summer driving / vacation season is less than 6 months away, China is still growing, new sources are not being found as they once were, and geo-political tensions are not any better than they were 6 months prior. Those that think crude will stay this low for long are foolhardy. It'll be back up and at that point I will cash out. It is all a matter of one's timeframe. If you want 20% overnight, perhaps the oil sector is not for you, if you want 50% or more in a year then you may want to chip away at these levels.

[Lou]

gas is in the mid $1.90 range in Columbus, Ohio. In the last week its dropped 20-30 cents

[TonyM]

Yeah, those gas station owners are such jerks for trying to engage in capitalism, don't they know that's reserved for us traders?

I guess those in favor of dictating what the gas station owner charges and how much profit he makes are also in favor of Congress limiting CEO compensation? How about if Uncle Sam puts a ceiling on how much profit you can make on a trade?

Even if a certain level of profit were illegal, unless you've seen the company's p&l statement how on earth can you say the company is overcharging?

When looking at gas prices you should be looking at RBOB gasoline futures anyway.

I'm not trying to bash anyone, but c'mon guys we of all people should be open to a free market in any form of for-profit business.

As far as oil prices, I believe we go to $46 with some short covering and selling the rallies along the way. I'd use last fall's drop as a guide to the big cap oils reaction. XOM and CVX are going to be pretty well oversold under $68 and $66 respectively. SU under $68 should be a good entry also. The majors have fared remarkably well on this drop compared to last fall though. For example; XOM is still higher now than it was through August of last year.

I don't see crude in the $40's as being a very long term event, though Winter will need to last more than 2 weeks and Opec will need to unify and implement the full 1.7 million barrel cut, to make it sooner than later.

[cramerica1972]

Yeah, those gas station owners are such jerks for trying to engage in capitalism, don't they know that's reserved for us traders?

I guess those in favor of dictating what the gas station owner charges and how much profit he makes are also in favor of Congress limiting CEO compensation? How about if Uncle Sam puts a ceiling on how much profit you can make on a trade?

Even if a certain level of profit were illegal, unless you've seen the company's p&l statement how on earth can you say the company is overcharging?

When looking at gas prices you should be looking at RBOB gasoline futures anyway.

I'm not trying to bash anyone, but c'mon guys we of all people should be open to a free market in any form of for-profit business.

As far as oil prices, I believe we go to $46 with some short covering and selling the rallies along the way. I'd use last fall's drop as a guide to the big cap oils reaction. XOM and CVX are going to be pretty well oversold under $68 and $66 respectively. SU under $68 should be a good entry also. The majors have fared remarkably well on this drop compared to last fall though. For example; XOM is still higher now than it was through August of last year.

I don't see crude in the $40's as being a very long term event, though Winter will need to last more than 2 weeks and Opec will need to unify and implement the full 1.7 million barrel cut, to make it sooner than later.what about speculators who minipulate the price?OPEC is the mid-east version of the mafia,they are no different from the cocaine drug cartels.too bad they cant be taken before the WTO.

[optimus25]

In regards to the gas stations it is well documented. I heard on 700 WLW this morning they cited a study from a reputable source that exactly what we all have witnessed, is indeed fact. Individual station owners raise prices immediately to cooincide with crude's jump, but when crude falls there is a delay until they bring prices down. The study attributed it to human nature. If the guy across the street doesn't lower then neither will his neighbor. Sucks if you ask me.

Optimus, I have been a strong buyer of oils once crude went sub-$55, the day it went in to the $52 range after certain technicals broke down. I'm in SU under $70/share. I'm not so much looking for a short term bounce, though it will happen, rather I am using this opportunity to buy for the next 6-18 months out.

The summer driving / vacation season is less than 6 months away, China is still growing, new sources are not being found as they once were, and geo-political tensions are not any better than they were 6 months prior. Those that think crude will stay this low for long are foolhardy. It'll be back up and at that point I will cash out. It is all a matter of one's timeframe. If you want 20% overnight, perhaps the oil sector is not for you, if you want 50% or more in a year then you may want to chip away at these levels.

I agree with you about the summer driving season. I'm looking at some indexes to get broad exposure as opposed to individual issues...aside from CNE which has a nice dividend yield I am looking at iShares OIL to have a bounce going into the summer.

[robvia]

It's not all doom and gloom for the oil stocks.

Look at COP. Yes, it took a dip, but it's going up today. I have options on it.

From what Cramer said in his newest book, COP is the annointed oil stock, bought by fund managers. This could be the gift some of you are looking for.

[madcowdisease]

I agree with you about the summer driving season. I'm looking at some indexes to get broad exposure as opposed to individual issues...aside from CNE which has a nice dividend yield I am looking at iShares OIL to have a bounce going into the summer.


Wouldn't you want to eschew the lagards, inherently bundled in ETFs, and just pick the top stocks in the sector for maximum performace?

[optimus25]

Wouldn't you want to eschew the lagards, inherently bundled in ETFs, and just pick the top stocks in the sector for maximum performace?

Correction on my part. Its not an ETF, its an ETN by iShares.

http://www.ipathetn.com/gs_crude_oil_overview.jsp

It tracks crude oil futures.

[madcowdisease]

Correction on my part. Its not an ETF, its an ETN by iShares.

http://www.ipathetn.com/gs_crude_oil_overview.jsp

It tracks crude oil futures.

I see, very interesting. Define ETN, please.

This seems a much better investment than an ETF for the reasons mentioned in my previous post, but, wont certain levereged stocks earn a greater return as the commodity rises given they are derivatives (e.g. XTO)?

[optimus25]

I'm having a problem defining ETNs as they are a relatively new product from iShares...so the jury is still out. But I do like the benefits of trading oil futures.

You're right, individual oil company stocks will have higher upside potential. The only one I've bought so far is CNE...not a company but a trust that has a high dividend rate. Levered to around 70% oil and 30% Nat gas.

[madcowdisease]

I'm having a problem defining ETNs as they are a relatively new product from iShares...so the jury is still out. But I do like the benefits of trading oil futures.

You're right, individual oil company stocks will have higher upside potential. The only one I've bought so far is CNE...not a company but a trust that has a high dividend rate. Levered to around 70% oil and 30% Nat gas.

I sent you a PM with my oil trust pick.

Oil stocks may face further obstacles with this:

http://www.msnbc.msn.com/id/16691568/

Let me know what you think. I don't own any oils that lease American land, that i kow of, so I think I'm in the clear. Either way, this doesn't look good.

[optimus25]

I think we'll find out soon enough where oil is going. Geopolitical terror risks remain.

[Seamus]

I am long in COP and couldn't believe that it still has legs to stay above the 62 mark. I would like to see it in the 50's before pulling the trigger.

As for some off the wall geo political stuff, there has been speculation that Saudi Arabia is cooling down Iran who is making large profits off the high oil prices. The drop in price slows their ability to accelerate the nuclear technology and update weapons. This is all come about with the new focus the president has had on the area with troop surges, and arresting Iranians in Iraq.

So there could be other forces than the driving season affecting oil. Then if I had a dollar for every inventory report that comes out every week with one saying inventories are high, then next week low??
Oh and you can not go through a potential drop in fuel prices without a refinery in California catching on fire.

[coolio]

I would wait until oil falls further before jumping into exxon, conoco or any of the majors. We've had quite a run-up since 2000 that is a historical abberation, if you ask me. I would look at oil at the 30's and low 40's before I would buy a major.

Check out this chart about historical crude oil prices (in inflation adjusted dollars).

http://www.wtrg.com/oil_graphs/oilprice1947.gif

I'm not convinced that the spigot is about to dry. You had that that major find in the gulf that was announced last year. Also, there are the oil sands in Canada that are still be fully tapped. I think technology will be able to drop the cost of mining those sands.

If you're itching to get in oil, buy a refiner. You saw oil go below $50 and the price at the pump did not budge. I am a strictly long buy and hold (min. 1 year for tax purposes) investor.

[optimus25]

I would wait until oil falls further before jumping into exxon, conoco or any of the majors. We've had quite a run-up since 2000 that is a historical abberation, if you ask me. I would look at oil at the 30's and low 40's before I would buy a major.

Check out this chart about historical crude oil prices (in inflation adjusted dollars).

http://www.wtrg.com/oil_graphs/oilprice1947.gif

I'm not convinced that the spigot is about to dry. You had that that major find in the gulf that was announced last year. Also, there are the oil sands in Canada that are still be fully tapped. I think technology will be able to drop the cost of mining those sands.

If you're itching to get in oil, buy a refiner. You saw oil go below $50 and the price at the pump did not budge. I am a strictly long buy and hold (min. 1 year for tax purposes) investor.

hmm...in terms of refiners, what's on your watch list?

[madcowdisease]

hmm...in terms of refiners, what's on your watch list?

The only two I am aware of are VLO and TSO. One serves the West and the other predominantly the Eastern half of the country if I remember correctly.

BTW, I don't buy in to this theory of oil being too high on the basis of historical standards. The major find in the Gulf was one and the term "major" is relative. It still pales in comparison to the fields they were finding in the Saudi penninsula 5 or 6 decades ago. The Dems are about to slap a royalties backcharge on Gulf drillers. This will only exacerbate the cost of obtaiing more oil in the future and disuade co.s from persuing that route.

As far as the oil sands, even if technology does lower the cost, and I'm sure it will, it won't lower it to the level of light sweet crude. One thing you need to keep in mind is that the best case scenario is we maintain the current level of crude oil production, and that may be wishful thinking. That still doesn't address the growing demand. 2 billion Chinese are Westernizing as well as over 1 billion Indians.

America uses the most oil on the planet by far and we only have 300 million ppl (BTW our population and per capita consumption is growing as well). What happens when the 3 billion+ people across the Pacific consume as much as each of us does here in America? We will be worried about more than just oil. Water, food, clean air, fishing waters and a whole lot more will become real scare real quick.

This isn't a short term trade. I'm long oil for a long time. Look at the longterm trend, not what the data says is happening quarter by quarter.

[coolio]

hmm...in terms of refiners, what's on your watch list?

Valero, Sunoco and Marathon oil, in that order.

I am a big fan of VLO because they generate cash and they are one of the only ones that can refine the heavy crude from Canada.

[coolio]

The only two I am aware of are VLO and TSO. One serves the West and the other predominantly the Eastern half of the country if I remember correctly.

BTW, I don't buy in to this theory of oil being too high on the basis of historical standards. The major find in the Gulf was one and the term "major" is relative. It still pales in comparison to the fields they were finding in the Saudi penninsula 5 or 6 decades ago. The Dems are about to slap a royalties backcharge on Gulf drillers. This will only exacerbate the cost of obtaiing more oil in the future and disuade co.s from persuing that route.

As far as the oil sands, even if technology does lower the cost, and I'm sure it will, it won't lower it to the level of light sweet crude. One thing you need to keep in mind is that the best case scenario is we maintain the current level of crude oil production, and that may be wishful thinking. That still doesn't address the growing demand. 2 billion Chinese are Westernizing as well as over 1 billion Indians.

America uses the most oil on the planet by far and we only have 300 million ppl (BTW our population and per capita consumption is growing as well). What happens when the 3 billion+ people across the Pacific consume as much as each of us does here in America? We will be worried about more than just oil. Water, food, clean air, fishing waters and a whole lot more will become real scare real quick.

This isn't a short term trade. I'm long oil for a long time. Look at the longterm trend, not what the data says is happening quarter by quarter.

I guess I'm also a skeptic on this whole China thing. I heard Bill Miller of Legg Mason saying that everyone is all gaga over China, yet their economy is roughly the size of Italy's. He said that we never hear the financial pundits saying we should be dying to do business with the Italians. <I did a quick google search and couldn't find his quote, but it was at a televised financial conference of some sort>.

I'm old enough to remember everyone saying the Japanese were going to buy any all all form of US corporations. They were going to DOMINATE us and the world economy. Sony, Mitsubishi, Kawasaki these guys were going to school us. That never happened and they sort of imploded.

I am from Texas and I can't believe that we are shipping manufacturing jobs from Mexico to China because of labor costs. Those people out there must be working for less than peanuts, because I KNOW the Mexicans work for peanuts. Mexico was so cheap that our companies would set up huge manufacturing plants across from El Paso and Laredo. Now they are being shipped to China.

As for India, I can't think of a single thing they do other than the call centers. Show me an india microsoft, caterpillar or ingersoll rand and I'll be convinced.

[englishman26]

As for India, I can't think of a single thing they do other than the call centers. Show me an india microsoft, caterpillar or ingersoll rand and I'll be convinced.

One of the biggest most successful generic drug makers in the world is from India. This is an example of real competition for US/UK drug companies. Read Pfizer's comments as they get rid of 10,000 employees!

There are several examples of good and strong Indian businesses.

The global economy doesn't have anything to do with anyone "taking over the world."

[robvia]

COP is coming back today and they report tomorrow (01/24/07) at 11am.

They've already warned about lower numbers since oil is down, so that's "baked in" to the stock as they say. Still will be interesting to see if they get slammed.

http://biz.yahoo.com/ap/070122/earns_preview_conocophillips.html?.v=1

[optimus25]

One of the biggest most successful generic drug makers in the world is from India. This is an example of real competition for US/UK drug companies. Read Pfizer's comments as they get rid of 10,000 employees!

There are several examples of good and strong Indian businesses.

The global economy doesn't have anything to do with anyone "taking over the world."

I'd like to add TTM, its India's biggest auto company.

INFY, WIT, CTSH...all still babies compared to Microsoft, but babies eventually become full grown adults. Its a wait and see for that part of the world. Risk is high, but so are the rewards. That's the risk of investing in emerging markets right? Especially with the growth potential of China and India.

[optimus25]

MCD, i fully agree with you on your view of energy and china. They have yet to fully build their auto infrastructure and yet I suspect that the explosion of the chinese and indian middle class will have a hand in the increased consumption of fossil fuel. Its a scary thought that may or may not happen. But if it does come to fruition, I don't anticipate oil going down anytime soon...at least not below $30/barrell.

[englishman26]

TEVA, was the india drug play that I couldn't reemeber the name of. There are others though.

I think Cramer was dead right on SLB last night. Bought SLB and SU end of last week for some spread out exposure to the run up in oil that we're probably going to see. SLB will run with or without oil though, I think.

[madcowdisease]

TEVA, was the india drug play that I couldn't reemeber the name of. There are others though.

I think Cramer was dead right on SLB last night. Bought SLB and SU end of last week for some spread out exposure to the run up in oil that we're probably going to see. SLB will run with or without oil though, I think.

We may well see a sector rotation out of seemingly underperforming, at least relative to they hype, tech and in to oil before the summer run up. I'm as loaded as I have ever been in oil but damn if it isn't tempting to buy more on weakness.

[robvia]

^^^ I don't know about that. COP just reported, the analysts knew the numbers would be lower, but the stock is heading lower. It was going up nicely this morning until the reports came out. COP is the first oil stock to report, if the analysts knock it down, they'll do the same to the others. COP is buying back shares, so that's one good thing.

If you can't go into oil, and you can't go into tech, then were do you go? Unless you wait for the dip and buy the bottom.

[madcowdisease]

^^^ I don't know about that. COP just reported, the analysts knew the numbers would be lower, but the stock is heading lower. It was going up nicely this morning until the reports came out. COP is the first oil stock to report, if the analysts knock it down, they'll do the same to the others. COP is buying back shares, so that's one good thing.

If you can't go into oil, and you can't go into tech, then were do you go? Unless you wait for the dip and buy the bottom.

I bought the bottom a couple weeks ago. I'm up 10% already in many of my positions.


On a side note, I see gasoline all over town has now increased anywhere from 20 to 40 cents a gallon in the past 2 days. It sure took them forever to lower it but the slightest hint of an increase in crude and they'll wake up at 4AM to go change the signs.

[cramerica1972]

I bought the bottom a couple weeks ago. I'm up 10% already in many of my positions.


On a side note, I see gasoline all over town has now increased anywhere from 20 to 40 cents a gallon in the past 2 days. It sure took them forever to lower it but the slightest hint of an increase in crude and they'll wake up at 4AM to go change the signs.price manipulation?

[evnp85]

It could be just be sexy dream; or oil could just be on its way back up. Either way; I am up at this point.

[robvia]

It's called "sticky pricing" and yes, it is rigged. The slightest hint of any bad news and gas prices sky rocket. But they don't come down until competition forces them to. So if all the gas station around town don't lower them, then prices stay high.

I listened to the COP conference call, and it turned out very well. They're buying back shares and want to raise the dividend. After the call, the stock turned around and headed up.

[madcowdisease]

I want oil to go sub-$55/bl again so I can pickup more shares of my current positions to make it an even lot. I got hit today, down about 1.5%, but I'm still up nicely.

[optimus25]

It was a challenging day as I didn't see many stocks up. Across the board weakness...

Got lucky by selling a couple of stocks yesterday...good riddance YHOO & EWY.

[coolio]

Wanted to post this article in support of my theory that the run up in oil prices is a historical abberation.

http://www.businessweek.com/magazine/content/07_06/b4020055.htm?chan=search

This is from the latest issue of businessweek.

[aiki14]

I don't like the concept of 100 yr megatrends and other very long term analytics. Some things aren't in a down part of a cycle they are obsolete. I think you need to occassionally need to re-evaluate the paradigm rather than look at things from the point of view of a cycle. The changing political environment and the various entities who participate in energy geopolitics are so fluid that prior trends may be meaningless.

[madcowdisease]

Seems last years compares are killing big oil. Crude oil is up nearly 20% (sub-$50 to $59/bl) in two weeks yet most oil stocks are flat or down a little.

[TonyM]

Seems last years compares are killing big oil. Crude oil is up nearly 20% (sub-$50 to $59/bl) in two weeks yet most oil stocks are flat or down a little.

Depends on how you look at it; a lot of oil stocks are not too far from their 52w highs, whereas crude is way off it's 52wh. I think the fact that the oils haven't plummeted along with crude or after less than desirable earnings and guidance is really telling of the strength in the oil stocks.

[madcowdisease]

Depends on how you look at it; a lot of oil stocks are not too far from their 52w highs, whereas crude is way off it's 52wh. I think the fact that the oils haven't plummeted along with crude or after less than desirable earnings and guidance is really telling of the strength in the oil stocks.

Crude down today yet gasoline jumped 20 cents. Go figure. I wonder if they'll blame this on swithing to a summer blend early :roll:

[madcowdisease]

Nice call on OIL Optimus. I was/am loaded on oils so I couldn't justify trading the commodity as well. Something about diversifying.

The oils are stil strong as the commodity continues to climb with theis cold snap we're experiencing. Spring Break is just arund the corner, then Memorial Day kicks off the summer driving season and all the acationers hot the beaches. It looks like $60/bl is here to stay and the smaller oil plays are starting to reflect it as well as the major integrateds.