Shorted OIL

empee · Jun 12, 2006

Hi, I shorted August Oil at 72.45 this AM, the July contracts broke 71.50. I'm looking for a big move down (meaning a change in trend) potentially testing $50/barrel over the coming months (of course I will roll over if needed)

My stop on August is at breakeven. Lets see what happens; I'm just expecting a potential longer-term trend reversal around here.

landboy · Jun 12, 2006

You're very optimistic

libertad · Jun 12, 2006

http://www.businessweek.com/ap/financialnews/D8I6LAC80.htm?sub=apn_home_up&chan=db

The CEO of BP tends to agree....not a trading oriented call...

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Maintaining the leveraged position tricky business...
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Looks like a $75 stock possibly going to $40 within 30 months....
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mtzianos · Jun 12, 2006

If the powers that be ever decide to fix the broken price discovery mechanism in the oil market, (see http://dhatz.blogspot.com/2006/06/oil-to-38657-per-barrel.html ) $50/bar should be a conservative target.

segv · Jun 12, 2006

Quote from empee:

Hi, I shorted August Oil at 72.45 this AM, the July contracts broke 71.50. I'm looking for a big move down (meaning a change in trend) potentially testing $50/barrel over the coming months (of course I will roll over if needed)

My stop on August is at breakeven. Lets see what happens; I'm just expecting a potential longer-term trend reversal around here.

You are shorting a market with capped production and inexorably increasing demand... Good Luck!

-segv

mtzianos · Jun 13, 2006

Quote from segv:

You are shorting a market with capped production and inexorably increasing demand... Good Luck!

If you're referring to a decade long timeframe of the supply/demand picture, then possibly yes (I don;t agree but consider it possible).

But for the moment (and the recent past), the oil market is DROWNING in oil.

The following was published a week ago in WSJ:

In an interview after a meeting here of the Organization of Petroleum Exporting Countries, Ali Naimi said other cartel members are having trouble finding buyers for all the crude they are producing, at a time when global stores are near full and many refiners have closed facilities for routine maintenance. One Saudi official said an estimated three million barrels a day of refining capacity is out of action and unable to process crude, at a time when the world is using some 84 million barrels a day of oil products like gasoline and jet fuel.

"It's not just heavy oil. Even light oil is having problems" finding buyers, Mr. Naimi said, referring to premium grades of crude known as light crude that are highly prized by refiners because they have high gasoline yields.

Asked if the kingdom was easing up on supply because of concern about the buildup of inventories in the U.S. and other importing countries, Mr. Naimi rejected such a motive, replying: "At $70 a barrel?" Mr. Naimi suggested that producers will sell all the oil they can at such high prices.

The implication of Mr. Naimi's remarks is that Saudi Arabia would again open its oil spigots when buyers ask for more oil. For the past two years, the Saudis say, their policy has been to sell as much oil as buyers want, to the limit of the kingdom's production capacity.

GlobalFinancier · Jun 13, 2006

I think we'll see lower prices, precious metals are having their butt kicked.

2cents · Jun 13, 2006

agree... hurricanes allowing, oil's headed towards $60-55, then unless demand abates (unlikely) or substitution's in place (unlikely) we've got the refinery capacity bottleneck...

segv · Jun 15, 2006

Quote from mtzianos:

If you're referring to a decade long timeframe of the supply/demand picture, then possibly yes (I don;t agree but consider it possible).

The immediate scenario is rapidly increasing demand, capped production, and uncertain supply. China and India are putting over 1000 new automobiles on the road on every single day. Demand for oil in the United States is growing uninhibited. There is a high probability of supply disruption due to terrorist attack, war in the middle east, worsening severe weather cycles, aging production facilities, and other unforeseen events. Good luck shorting oil, you are going to need it.

-segv

2cents · Jun 15, 2006

i don't actually... but i see your point... however i believe the war premium is going away soon... and the china risk is getting more obvious every day...