A play in Crude

arrowloopboy

I'm thinking of taking a large position on crude at around this level $48.or lower , with leverage x 2 , that would put my s/l at about $24 a barrel ,this could be left long term , with a target of $80/$100 a barrel . The sweetener here is that I currently buy about 2ks worth of fuel per week through my business , so I can't see how I can lose , any opinions ?

euroboom13

can`t see how you could loose, time is its only enemy!

For ever odd

Another way could be to fill your tanks and reserves with fuel now, and go short oil.

You might get a better entry point on your long bet.

ixus

It's difficult to analyse not knowing what large represents (and you don't need to divulge) and the timeframe. It's 2400 points, which is a lot. If oil hits that level I think we're looking at economic hardships. Will business stand up to that to make it a good play?

Is it the best use of your funds while locked up? Would a long dated option be best value?

What would it take to get back to $80? Opec cut might but not so sure. Only recent comparison is financial crisis.

Also, fx to consider. If euro and oil go up, will you make much? If euro goes up and oil down, are you risking more than the $24?

Some questions to consider.

jank

I have looked into some ETF's that are leverage but afaik they charge over 1% per day due to the high leverage.
http://etfdb.com/etf/UWTI/

lucky john

I assume your stop loss is at 24 because you rate a possible further drop in prices fairly high. Since its a large position why not hedge it and split your funds. 50% (60%) of funds ready to go at $48 with the other 50% kept in reserve to be invested at $38. Looking at the way Russia, iran and the US are upping production now and adding to the oversupply it's hard to see oil holding at $50.

euroboom13

If I had put some more money, rather than thought in 2yrs ago, I would Be spending money rather than time now.lol

I think the greatest bet on oil, was in the drop, but catching a rise might work, but slowly.

Next drop is the dollar IMO.

lucky john

euroboom13 wrote: »

If I had put some more money, rather than thought in 2yrs ago, I would Be spending money rather than time now.lol

I think the greatest bet on oil, was in the drop, but catching a rise might work, but slowly.

Next drop is the dollar IMO.

At this moment there isn't very much complaining in the US about the strong dollar. The fed are still considering upping interest rates and at the same time most other currencies are under pressure. While I agree a dollar that is too strong is not in the long term interest of the states I don't see an easy way for them to devalue it. Not this year anyway. How do you see this playing out?

euroboom13

lucky john wrote: »

At this moment there isn't very much complaining in the US about the strong dollar. The fed are still considering upping interest rates and at the same time most other currencies are under pressure. While I agree a dollar that is too strong is not in the long term interest of the states I don't see an easy way for them to devalue it. Not this year anyway. How do you see this playing out?

It needs to happen ,so "how" is the surprise.

Small drip fed QE doesn`t work, needs a one off devaluation similar to Russia.

As someone pointed out "Texas" and "Russia" have similar GDP.(when judge in$$)
Some cold war that would be ,=you take Texas ,we`ll take Russia.

For ever odd

euroboom13 wrote: »

It needs to happen ,so "how" is the surprise.

War.
In my opinion America is gagging for a fight, the problem they have is Obama doesn't have the stomach for it.
If oil prices keep falling and it starts to hurt the big US oil companies, war it shall be with or without Obama.

arrowloopboy

jank wrote: »

I have looked into some ETF's that are leverage but afaik they charge over 1% per day due to the high leverage.
http://etfdb.com/etf/UWTI/

This trade would be executed via a spread bet , workink out at 8 points per 1/4 , or 32 points per annum on a '' share'' worth 4800.00 points , with a s/l at about 2400.00 points ( $24 a barrel) that's below production cost in most parts of the world except the Middle East ($15), the cost of the trade is about a percent a year I think, I need to work that out , but it's a pittance compared to the return I'm looking for .

If oil drops to anything close to $24 a barrel , I'd happily remortgage my hose to fill my boots .

arrowloopboy

Production costs per barrel

U.s
Onshore $31.38
Off shore $51.60

Canada $ 24.76

Africa $ 45.61

middle east $ 16.88

C/South America $ $ 26.64

All other countries Average $ 25.08


These costs represent a combination of the finding and lifting costs.

At the current price c$48.50 ,the off shore wells in the u.s are producing at a loss and African wells are heading that way.

These prices are from 2010,
I can't find a figure for Fracked oil per barrel ,if any of ye have a figure,pleas add it in.

Value Hunter

Arrow,

Have you considered any direct oil related stocks? Some are trading at extremely distressed levels. They could offer you a leveraged benefit to rising oil prices.

Just for example, MDR (McDermott International) is trading at a market cap of $700m but has a cash balance alone of $900m.

Very high risk if oil continues to decline, but something to consider.

Value Hunter

arrowloopboy wrote: »

Production costs per barrel

U.s
Onshore $31.38
Off shore $51.60

Canada $ 24.76

Africa $ 45.61

middle east $ 16.88

C/South America $ $ 26.64

All other countries Average $ 25.08


These costs represent a combination of the finding and lifting costs.

At the current price c$48.50 ,the off shore wells in the u.s are producing at a loss and African wells are heading that way.

These prices are from 2010,
I can't find a figure for Fracked oil per barrel ,if any of ye have a figure,pleas add it in.

Last I heard,

Saudi oil $10 per barrel

US Fracking oil between $45 and $55.

Canadian $70.

Venezuelan $60 est.

However, CNBC's Brian Sullivan was in North Dakota last month, and he was reporting that oil producers were asking suppliers/providers for 25%-50% cost decreases. They were getting them without argument.

They reckon US fracking cost will be between $35-$40.

Very interesting times

arrowloopboy

Value Hunter wrote: »

Arrow,

Have you considered any direct oil related stocks? Some are trading at extremely distressed levels. They could offer you a leveraged benefit to rising oil prices.

Just for example, MDR (McDermott International) is trading at a market cap of $700m but has a cash balance alone of $900m.

Very high risk if oil continues to decline, but something to consider.

No,im more interested in spot crude ,I havn't looked at rtelated stocks.

jank

Oil related stock have not dropped in the same fashion as the spot price of oil, which leads me to believe that there will be lag here once earnings start to get hit.
Eg,
Royal shell stock price is only down 8.5% for the past six months.
BP is down a little over 10%
While the spot price of oil is down over 50%...

Ok they are the majors but they have held up all considering I think.
The juniors have been hit harder but you risk losing it all and if the risk is that high, then why not just buy into the spot price. Oil can't go to $0 but a junior oiler sure can.

arrowloopboy

I've been onto ig ,the exact cost of the trade would be about 3% per annum ,do any of ye know of a cheaper option ?

lucky john

http://www.sam.ie/spread-trading/the-benefits/ no idea of cost though.

arrowloopboy wrote: »

I've been onto ig ,the exact cost of the trade would be about 3% per annum ,do any of ye know of a cheaper option ?

Geuze

arrowloopboy wrote: »

Production costs per barrel

U.s
Onshore $31.38
Off shore $51.60

Canada $ 24.76

Africa $ 45.61

middle east $ 16.88

C/South America $ $ 26.64

All other countries Average $ 25.08


These costs represent a combination of the finding and lifting costs.

At the current price c$48.50 ,the off shore wells in the u.s are producing at a loss and African wells are heading that way.

These prices are from 2010,
I can't find a figure for Fracked oil per barrel ,if any of ye have a figure,pleas add it in.

http://econbrowser.com/archives/2014/12/supply-demand-and-the-price-of-oil

This may help.

Geuze

http://econbrowser.com/wp-content/uploads/2014/12/long_marg_cost.jpg

Grecco

Have a look at 3Oil (3OIL LN) its a 3x Leverage Daily ETP

http://www.boostetp.com/Product/19/Commodities/Boost-WTI-Oil-3x-Leverage-Daily-ETP/Pricing-Exchanges

3 Times the gains but also 3 times the losses so be carefull

Roonbox

arrowloopboy wrote: »

I'm thinking of taking a large position on crude at around this level $48.or lower , with leverage x 2 , that would put my s/l at about $24 a barrel ,this could be left long term , with a target of $80/$100 a barrel . The sweetener here is that I currently buy about 2ks worth of fuel per week through my business , so I can't see how I can lose , any opinions ?

Interesting, I took a position on oil for the first time in years earlier today, long at $47, start getting into trouble at $35.

I remember when it collapsed from 147 to mid 30's a few years back, I hate bottom picking but couldn't resist the value

arrowloopboy

Roonbox wrote: »

Interesting, I took a position on oil for the first time in years earlier today, long at $47, start getting into trouble at $35.

I remember when it collapsed from 147 to mid 30's a few years back, I hate bottom picking but couldn't resist the value

I havn't moved yet ,$40 would be nice with more a $35 and dare I say it more at $30,with no trouble ,just hold and the hold some more for $80+ ,I hope it continues to drop (my business is saving about 700 quid a week on oil compared to this time last year) ,its not like a share that can go to zilch,i reckon it can't possibly get lower that $30,and as the past has shown ,$100 isn't out of the question in the next 2/3 years .

How did you take your position ?

jank

Seems to be no bottom as of yet, they are now talking about $35 when a few weeks ago $45 would have been the bottom. When the bottom comes there will be a massive reversal as money will pour in and then a slow long multi year climb back to $70+

For ever odd

Arrow, you said your fuel bill is down €700 per week from last year to about €2000 per week this year. Oil is down 57% or so in the year.
Just out of curiosity, do you find that when oil prices are falling it takes a long time for it to reflected in retail prices, and when oil is rising or high it is reflected quickly in retail prices?
Just something I noticed at the petrol pumps through the years, but as your buying in much larger volume's I'd like to hear your view.

lucky john

For ever odd wrote: »

Arrow, you said your fuel bill is down €700 per week from last year to about €2000 per week this year. Oil is down 57% or so in the year.
Just out of curiosity, do you find that when oil prices are falling it takes a long time for it to reflected in retail prices, and when oil is rising or high it is reflected quickly in retail prices?
Just something I noticed at the petrol pumps through the years, but as your buying in much larger volume's I'd like to hear your view.

I use around 1500 lts of kerosene per month for a business. Prices including vat per 1000lt delivered. ...Nov. €780. Dec.€680 last week.. €630.

Morleystreet

A few people have mentioned spread betting oil. I have never done a spread bet before but have been trying to read up on same. Big plus is no tax on any potential winnings. Could anyone explain how to spread bet oil ( ie be prepared to hold for few years on assumption will rise in long term).

Here's some of the items I don't understand:

Do you have to pay an interest fee each day ( cos of leverage). What is typical % and is it a daily charge.

If bet is for 3 month durations, do you effectively have to sell and rebuy each 3mths on the particular day. Eg you might have to buy again at 55 and then at 65 etc so you can't really get full benefit of say 40 to 80 rise, you'd have to chance buying in every 3 mths.

I've read a few articles on contagion - don't really understand it, but seems to say you can still loose out even if oil price went your way!

Any help in throwing some light on above much appreciated and excuse
my lack of knowledge on above. In above example I'm assuming a rise in prices etc.

Roonbox

arrowloopboy wrote: »

I havn't moved yet ,$40 would be nice with more a $35 and dare I say it more at $30,with no trouble ,just hold and the hold some more for $80+ ,I hope it continues to drop (my business is saving about 700 quid a week on oil compared to this time last year) ,its not like a share that can go to zilch,i reckon it can't possibly get lower that $30,and as the past has shown ,$100 isn't out of the question in the next 2/3 years .

How did you take your position ?

With IG Index. Full disclosure I closed that position and have scalped a couple of trades going short.
I am now currently short from $49.50

arrowloopboy

Roonbox wrote: »

With IG Index. Full disclosure I closed that position and have scalped a couple of trades going short.
I am now currently short from $49.50

I think that was a good move Roonbox ,I am hoping the price will trickle down to $40 or lower,but i'd love to styart buying at $40 and again at $35.

Just a pitty the greenback is so strong.

arrowloopboy

lucky john wrote: »

I use around 1500 lts of kerosene per month for a business. Prices including vat per 1000lt delivered. ...Nov. €780. Dec.€680 last week.. €630.

I use 2-3000 litres a week ,was paying up to 0.90c a litre in june ,paid 0.48 on Friday ,these prices are x vat.

arrowloopboy

Morleystreet wrote: »

A few people have mentioned spread betting oil. I have never done a spread bet before but have been trying to read up on same. Big plus is no tax on any potential winnings. Could anyone explain how to spread bet oil ( ie be prepared to hold for few years on assumption will rise in long term).

Here's some of the items I don't understand:

Do you have to pay an interest fee each day ( cos of leverage). What is typical % and is it a daily charge.

If bet is for 3 month durations, do you effectively have to sell and rebuy each 3mths on the particular day. Eg you might have to buy again at 55 and then at 65 etc so you can't really get full benefit of say 40 to 80 rise, you'd have to chance buying in every 3 mths.

I've read a few articles on contagion - don't really understand it, but seems to say you can still loose out even if oil price went your way!

Any help in throwing some light on above much appreciated and excuse
my lack of knowledge on above. In above example I'm assuming a rise in prices etc.

Have a read of The Naked Traders book on Spreadbetting ,you'll read it in a night ,and will answer all your questions and give you a good understanding of spreadbetting as a whole .

Morleystreet

Thanks for suggestion arrow. Have read that book now and very good starting point for a complete beginner to spread betting.

arrowloopboy

Morleystreet wrote: »

Thanks for suggestion arrow. Have read that book now and very good starting point for a complete beginner to spread betting.

Your welcome,i wasn't been short with you buy suggesting reading a book,it just explains things a lot better than any of us on here could have explained in 2 or 3 lines.

ftse100

If I wanted to invest in oil (go long) what's the best way to go about doing so? I see oil falling another 10% max. If even. Thanks in advance

arrowloopboy

$45 a barrel ,$40 would be a nice starting point .

arrowloopboy

ftse100 wrote: »

If I wanted to invest in oil (go long) what's the best way to go about doing so? I see oil falling another 10% max. If even. Thanks in advance

At the right price i'm going to use a spread bet ,on a rolling contract ,as the furthest out contract I can buy is only 2 months ,this will cost 58 points of spread for a year.

Anyone know of a cheaper ,tax free ,leveraged method ,feel free to inform us.

Roonbox

arrowloopboy wrote: »

At the right price i'm going to use a spread bet ,on a rolling contract ,as the furthest out contract I can buy is only 2 months ,this will cost 58 points of spread for a year.

Anyone know of a cheaper ,tax free ,leveraged method ,feel free to inform us.

I have been Short Oil since the rally last week to $54. Went Short Crude but switched the Brent last night.

Looking for a retest of the lows a few weeks back or close to it.