Oil Rig Count and Predicting a Rebound

Blitzinger · Nov 23, 2015

Currently, the total US Oil Rig count for the US is at 757, a mere 8 rigs higher than 2002's count of 749. With the increasing amount of small oil companies approaching default, can we expect a rebound in oil prices?

I currently hold some ETFs that are long oil as well as some major Oil companies (exxon, bp, etc). I purchased my securities in early October and plan to hold for at least a year. What's everyones thoughts on this and what price expectation do you have for oils price a year from now? I'm betting/hoping for mid 60s price range.

Scataphagos · Nov 23, 2015

Blitzinger said:
Currently, the total US Oil Rig count for the US is at 757, a mere 8 rigs higher than 2002's count of 749. With the increasing amount of small oil companies approaching default, can we expect a rebound in oil prices?

I currently hold some ETFs that are long oil as well as some major Oil companies (exxon, bp, etc). I purchased my securities in early October and plan to hold for at least a year. What's everyones thoughts on this and what price expectation do you have for oils price a year from now? I'm betting/hoping for mid 60s price range.

Some of the big boys are forecasting $20 oil. Best have your stops in place should they prove correct.

Blitzinger · Nov 23, 2015

Scataphagos said:
Some of the big boys are forecasting $20 oil. Best have your stops in place should they prove correct.

Noted. But since I'm in this for the long haul, I'm going to weather whatever storm comes. If anything, I'll buy more as it drops. A few years ago, predicting these prices would have made you a joke. Now it's a reality (and I almost pulled the trigger on some leveraged shorts. kicking myself now). I'm a relatively small investor with 5k in and another 2k in cash ready to be put to use.

These prices are killing some of the major oil players as they battle for market share but I don't think it's sustainable. Add the ever increasing volatility of the middle east to the mix and I think it's a relatively safe bet. Again, even if oil slides further, I'm ready to scoop up more shares.

cjbuckley4 · Nov 23, 2015

Blitzinger said:
Currently, the total US Oil Rig count for the US is at 757, a mere 8 rigs higher than 2002's count of 749. With the increasing amount of small oil companies approaching default, can we expect a rebound in oil prices?

I currently hold some ETFs that are long oil as well as some major Oil companies (exxon, bp, etc). I purchased my securities in early October and plan to hold for at least a year. What's everyones thoughts on this and what price expectation do you have for oils price a year from now? I'm betting/hoping for mid 60s price range.

October 2016 CL futures are at like 48 right now. In my opinion, there's just too much downside risk. Also, be careful with those oil ETFs.

FCXoptions · Nov 23, 2015

You could probably do some call spreads on USO or something if you are expecting a move up in oil. That might reduce your downside risk and still give you plenty of upside. A couple months ago I put on several uso call spreads for almost nothing. I would need oil to hit about $60 in the next 2 months for it to pay out fully (unlikely) but it cost me very little to enter anyways, so no big deal.

Just a thought.

Blitzinger · Nov 23, 2015

I dont fully understand options and am going to avoid them for now until I gain a better understanding (also studying for the series 3 so that should help increase my competency level). Honestly I'm a bit surprised people on here are a bit more in line with pessimism in this market. Is there something I'm missing?

xandman · Nov 23, 2015

Blitzinger said:
I dont fully understand options and am going to avoid them for now until I gain a better understanding (also studying for the series 3 so that should help increase my competency level). Honestly I'm a bit surprised people on here are a bit more in line with pessimism in this market. Is there something I'm missing?

There is a big demand issue with China as well. We are a late in the business cycle where oil typically stages a massive rally. It looks like oil has missed the boat. The Fed is going to raise rates when they typically lag as a reaction to inflation. The back months will flatten and countries will deliver their oil hedged at a higher selling price (and get crowned as a policy genius). It is a vicious circle.

http://www.bloomberg.com/news/artic...ear-mexico-set-for-6-billion-hedging-windfall

FCXoptions · Nov 23, 2015

xandman said:
There is a big demand issue with China as well. We are a late in the business cycle where oil typically stages a massive rally. It looks like oil has missed the boat. The Fed is going to raise rates when they typically lag as a reaction to inflation. The back months will flatten and countries will deliver their oil hedged at a higher selling price (and get crowned as a policy genius). It is a vicious circle.

http://www.bloomberg.com/news/artic...ear-mexico-set-for-6-billion-hedging-windfall

I didn't realize they hedged their production every year. That's a drop in the bucket for typical government standards (or at least US), but nonetheless that's an awesome payout.

Blitzinger · Nov 23, 2015

xandman said:
There is a big demand issue with China as well. We are a late in the business cycle where oil typically stages a massive rally. It looks like oil has missed the boat. The Fed is going to raise rates when they typically lag as a reaction to inflation. The back months will flatten and countries will deliver their oil hedged at a higher selling price (and get crowned as a policy genius). It is a vicious circle.

http://www.bloomberg.com/news/artic...ear-mexico-set-for-6-billion-hedging-windfall

Just to be sure I'm reading this right, so they locked in deals to sell oil at a price of 76.40/barrel regardless of how the market moves? Must have a fortune teller on their risk management team.

xandman · Nov 23, 2015

Blitzinger said:
Just to be sure I'm reading this right, so they locked in deals to sell oil at a price of 76.40/barrel regardless of how the market moves? Must have a fortune teller on their risk management team.

Correct. But in hindsight, the guy was probably worrying about his job when oil went from 100 to 75.

Not a fortune teller, but investment bankers who are going to get dealflow and million+ bonuses for the rest of their lives. Hopefully, the firm didn't take the other side.