Thoughts on crude

felixbocharov

felixbocharov

Hello guys, I've just read an interesting article on seekingalpha about crude prices. What do you think about future prices(by future I mean 6-18 month). I'm quite sceptical about prospects of crude by 4 main reasons:

1. Job Cuts: This time around, however, the layoffs are hitting geologists, engineers, and corporate headquarters, meaning cuts are hitting the strategic and long term plans of the company.

2. Iranian Oil: The ink on the nuclear deal is barely dry, but stored Iranian oil has already left the Persian Gulf for African customers.

3. Loans and Credit Lines: Wall Street banks are pressuring oil companies to raise more equity or make serious changes to free up additional cash now, all in anticipation of the biannual reevaluation of credit lines and loans coming in October 2015.

4. Saudi Arabian Refineries: Cheap oil is a boon for the refining industry, and Saudi Arabia is now well positioned to take advantage of that. Given the extent of its investment in downstream facilities, the Kingdom views refining as a long-term moneymaker.
 
Don't trade futures unless you have inside information
trading_places_1983.jpg
 
-Job cuts would mean a decrease in supply = theoretically oil should go up.
-Iranian oil flood = price should go down
-slower china growth = oil should go down
-interest rates rise or weak euro = stronger usd = oil goes down
-political tension/possible war in syria = oil should go up
-Interest rates rise = more oil defaults = less supply = oil should go up

that's all I can think of now, I think the question is how priced in are the above and also how much weight does each one carry.
 
As I think Crude Oil is going down, and as most know me on this forum as mechanical trader and my calls generally are like 95% wrong of what I think, I had made buys in March and did well on half and then stopped out, then dozen attempts all the way down into late Aug lows of buying with hedges but lowest buy did make target on half, have done Call Credit spread & Debit Put Spreads between April and June to work out, more in Aug and Oct, but I stay long from late August lows. Have added to on deep retracements only to get stopped out at overall breakeven.

In my heart I think it going lower to 30 ish area, but I have not done well in my life calling what I think I know as to doing what my well back tested Trading Plans. I am a baffoon when it comes to thinking I know what the market will do long term or short term, but I am very good at being smart enough, little more than snail brain, at trading my rules. A few of my calls long term are based on long term models like rules Indexes will exceed all time highs and my shorts will be stopped out with half positions but in mean time sitting on long calls and Put Credit spreads.

And I can't wait for my Crude system to be wrong some more as from horrible prices comes opportunities to get into some hard properties of buying existing wells.

You always want to build up 2-3 years worth of emergency monies just in case you get ill or when there are incredible deals and you have done due diligence exploring to make sure you not holding the bag on a poor opportunities. And yes, I once bought a dry well, LOL and must have speciality lawyers so you don't get screwed, lessons so expensive. I can laugh now, but back then....... It is sort of like when I see newbies opening up new accounts and can't wait to start trading, no matter how much we scream you will lose it, they only see the white beaches with the babe waiting for them.

There is no good reason for Crude Oil to go up, so that means it will.
 
A lot of financial analyst are predicting further fall in the prize of crude in the coming months. so I may no advise trading crude in the main time
 
The hard part is not analyzing the inputs as it affects the current price, but how future inputs affects the future price, and how much of that is already in the current price and forward curve.

My analysis says that this $40-50 area is a value area where lots of support from hedging will happen. I don't see how these predictions of $10 oil can happen, but I didn't see Citigroup goint to $2 either.

I realize that $40 to $50 is a big spread in percent of current price, but I think that is the best anyone can do at this time. Remember, OVX just came down not that long ago from 60!
 
Loftrader said:
A lot of financial analyst are predicting further fall in the prize of crude in the coming months. so I may no advise trading crude in the main time
More...
CL is manipulated - a well known fact by those in the know!

Still, that does not mean that one can not analyze, for in order to put on risk you must have an opinion!

My opinion, as of now, is that crude is currently setting up for a major turn - this will depend on many factors of course - not at least supply and demand :) - but if historical events do in fact predict future events, then the next few weeks / months will tell all.

If the grey line continues to fall, then CL (black line) will reverse very quickly (might not even make a DB) and make a fast move up!

If the grey line reverses, then CL might well take out the previous low and make a new one before reversing back up - it is not a bad time to think about using options on CL, as that big reversal might happen before X-Mas, and if wrong it won't cost you that much to find out, relative to what you might make - as when CL moves it moves - and it might have nothing to do with supply and demand :)

J_S

Screen Shot 10-27-15 at 09.50 PM.PNG


Screen Shot 10-27-15 at 10.04 PM.PNG


Screen Shot 10-27-15 at 10.15 PM.PNG
 
Last edited:
You must log in or register to reply here.
Back
Top