Comments on: Are we heading back to $100 barrel of oil? http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/ Everything to do with thickening your wallet Wed, 01 Feb 2012 15:44:00 +0000 hourly 1 http://wordpress.org/?v=3.3 By: My Investment Rules: Rule #1 - Undstand What You Invest In No Matter What! | My Findependence Day http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18513 My Investment Rules: Rule #1 - Undstand What You Invest In No Matter What! | My Findependence Day Wed, 01 Apr 2009 14:41:28 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18513 [...] first rule came to fruition while I was posting some comments over at Thicken My Wallet about my ownership of USO Oil ETF. I came to realize that I wasn’t following the most [...] [...] first rule came to fruition while I was posting some comments over at Thicken My Wallet about my ownership of USO Oil ETF. I came to realize that I wasn’t following the most [...]

]]> By: admin http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18491 admin Tue, 31 Mar 2009 01:37:19 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18491 Moneymonk- any reason why? Moneymonk- any reason why?

]]> By: Moneymonk http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18488 Moneymonk Mon, 30 Mar 2009 22:38:51 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18488 I plan to short oil I plan to short oil

]]> By: Lance http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18426 Lance Wed, 25 Mar 2009 15:16:33 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18426 I went in pretty hard to oil companies during the price crash in to the $30's. My biggest motivation for this is due to the rapidly declining oil production in many of the world's oil fields. Gulf of Mexico and the North Sea are two great examples of past productive oil fields that are pumping out less and less volume as each year goes by. Whether Saudi Arabia truly has the reserves they state or they have inflated their estimates as most of OPEC has (their allowed OPEC production rate is a ratio of their stated reserves, so it is in their interest to over-inflate their reserve estimates). With the global recession going on, oil demand is down, but not down nearly enough to offset the decline in production. Add to that the sudden halt in new oil exploration and development and we're setting ourselves up for a major oil supply crisis in the next 2-5 years. The recent rise to $145/barrel may look like nothing if we suddenly find supply incapable of keeping up to demand. I went in pretty hard to oil companies during the price crash in to the $30′s. My biggest motivation for this is due to the rapidly declining oil production in many of the world’s oil fields. Gulf of Mexico and the North Sea are two great examples of past productive oil fields that are pumping out less and less volume as each year goes by. Whether Saudi Arabia truly has the reserves they state or they have inflated their estimates as most of OPEC has (their allowed OPEC production rate is a ratio of their stated reserves, so it is in their interest to over-inflate their reserve estimates). With the global recession going on, oil demand is down, but not down nearly enough to offset the decline in production. Add to that the sudden halt in new oil exploration and development and we’re setting ourselves up for a major oil supply crisis in the next 2-5 years. The recent rise to $145/barrel may look like nothing if we suddenly find supply incapable of keeping up to demand.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18423 admin Wed, 25 Mar 2009 14:15:11 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18423 MFD: Interesting break-down of a product I am not familiar with. Thanks. MFD: Interesting break-down of a product I am not familiar with. Thanks.

]]> By: mfd http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18417 mfd Wed, 25 Mar 2009 01:05:43 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18417 It's not the worst. Its the best of the worst. There is no real good way to invest directly in oil. Several ETFs try to do it with varying degrees of success. USO has been stated as being one of the best across several publications but it has its issues. USO works by rolling over 1 month futures contracts which has part of the tracking issues with the real price of oil. USO is so large that when it rolls over its contracts it accounts for I believe 25% of all contracts (might be more) which means they artificially inflate the price of contracts when they go to rollover. They've tried to resolve this recently by spreading their rollover period over 4 days. See the following link: http://shockedinvestor.blogspot.com/2009/03/uso-rollover-of-oil-contracts.html Another issue is that because USO tracks oil using futures contracts it opens them up for tracking issues because of the contango they experience when they rollover their contracts. I've only recently begun to understand the complicated world of futures trading though I'm a far way off. See the following about the contango: http://www.smartmoney.com/investing/etfs/contango-and-cash-19323/ Maybe that's the problem and a lesson learned for the future. I didn't fully understand how this etf tracked oil and that should have been a warning sign to stay away. I really didn't have enough experience with the more exotic ETF's. It’s not the worst. Its the best of the worst. There is no real good way to invest directly in oil. Several ETFs try to do it with varying degrees of success. USO has been stated as being one of the best across several publications but it has its issues. USO works by rolling over 1 month futures contracts which has part of the tracking issues with the real price of oil.

USO is so large that when it rolls over its contracts it accounts for I believe 25% of all contracts (might be more) which means they artificially inflate the price of contracts when they go to rollover. They’ve tried to resolve this recently by spreading their rollover period over 4 days. See the following link:
http://shockedinvestor.blogspot.com/2009/03/uso-rollover-of-oil-contracts.html

Another issue is that because USO tracks oil using futures contracts it opens them up for tracking issues because of the contango they experience when they rollover their contracts. I’ve only recently begun to understand the complicated world of futures trading though I’m a far way off. See the following about the contango: http://www.smartmoney.com/investing/etfs/contango-and-cash-19323/

Maybe that’s the problem and a lesson learned for the future. I didn’t fully understand how this etf tracked oil and that should have been a warning sign to stay away. I really didn’t have enough experience with the more exotic ETF’s.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18415 admin Tue, 24 Mar 2009 21:50:44 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18415 Mfd- I do know enough about USO to comment. Why is it one of the worst ways to invest in oil? Geoff- I would argue that oil and gas trusts are more sensitive to price change than oil and gas stocks since its payout ratio is so much higher and there is smaller room for error so they tend not to be great downside risk vehicles. Mfd- I do know enough about USO to comment. Why is it one of the worst ways to invest in oil?

Geoff- I would argue that oil and gas trusts are more sensitive to price change than oil and gas stocks since its payout ratio is so much higher and there is smaller room for error so they tend not to be great downside risk vehicles.

]]> By: Geoff http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18414 Geoff Tue, 24 Mar 2009 21:30:21 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18414 What do you think of companies like Penn West and Baytex, the income trusts from out west? What do you think of companies like Penn West and Baytex, the income trusts from out west?

]]> By: mfd http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18410 mfd Tue, 24 Mar 2009 19:31:27 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18410 I bought USO at $35 to invest in oil. At the time the tracking grap wasn't as bad. Most of the stuff I read said USO was one of the best ways to invest directly in oil. Since then I've come to realize that USO the best of the worse. I'm considering selling because I can't stand to cheer for the increase in oil since gas prices usually follows. I bought USO at $35 to invest in oil. At the time the tracking grap wasn’t as bad. Most of the stuff I read said USO was one of the best ways to invest directly in oil. Since then I’ve come to realize that USO the best of the worse. I’m considering selling because I can’t stand to cheer for the increase in oil since gas prices usually follows.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2009/03/24/are-we-heading-back-to-100barrel-of-oil/comment-page-1/#comment-18409 admin Tue, 24 Mar 2009 15:35:53 +0000 http://www.thickenmywallet.com/blog/wp/?p=841#comment-18409 CC- The members of OPEC are known to play fast and loose with the rules. I cannot comment on the quota cheating but there is belief that provable reserves have been over-stated by several members of OPEC. CC- The members of OPEC are known to play fast and loose with the rules. I cannot comment on the quota cheating but there is belief that provable reserves have been over-stated by several members of OPEC.

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