Saturday, Mar 14, 2009
Brief analysis of where he thinks Crude is going
Weekend FT: Brent set to trickle down
No fundamentalist need apply.
Posted by techieman @ 01:20 PM (932 views) Add Comment
18 Comments
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1. drewster said...
Where does that leave the gold/oil ratio though? At present the ratio is saying gold is over-valued and oil is undervalued. Or maybe there isn't really any correlation between them.
2. techieman said...
Got me on that one Drewster. Its funny i said to S2R1 the other day that oil looks like a basing pattern or one more move down (which i then went on to say i favoured). After that i would be looking for a pattern to buy off of (although that doesnt mean the price cant go down more first).
In any case these ratio charts are far too complicated for me - for one thing Gold could come down too so the ratio would remain intact. You can stay with those charts and ill stay with my p&f, OHLC and candlesticks looking at one commodity/ instrument at a time!!
3. crunchy said...
I think the oil/gold correlation has been severed and to give myself an easy life let's leave it at that.
However you can not ignore the low risk buy on oil. Sit back relax and wait for the next oil crisis.
I am sure I will not have to wait too long.
The only way you can lose your shirt is if they start giving it away. AINT GONNA HAPPEN. No brainer.
4. uncle tom said...
Before the price of crude took off, North sea oil production (at least, the British bit) was declining rapidly. The increased price made it economic to chase the last drops of the easy oil, and go after the more inaccessible deposits.
What now? The government was projecting an income of £13.2bn from the North Sea this financial year, nearly half of it from corporation tax. They were already projecting a fall of £4.5bn in revenue for the coming financial year, and that was at a projected price of $60.
My guess is that the current year's revenues are going to be short of forecast, and in the coming year they could all but disappear, for if the oil price doesn't spike up soon, the oil companies will start shutting down their operations..
5. techieman said...
UT - re a comment you made the other day re stocks being cheap based on low PE ratios. I have to disagree with you - based on recent history yes PEs are low but if you go further back they arent. Also thats based on the Es being maintained. I think we will have more pain in that area that isnt fully discounted yet (although i havent ruled out sharp rallies).
I agree with your view on Gilts - i.e. that after this upmove dissapates in the medium term, Gilts will be a sell (although i think the yeild reduces significantly first and we might have a UFO to turn them around... a big fall off a bubble top wouldnt surprise me). But stocks? The reason i would like to engage on this is that i think you have a very good feel for the fundamentals.
6. drewster said...
Techie,
IMHO the ratio is fairly meaningless. Oil is a commodity, it is extracted and burned. Gold is a constant, the amount in existence barely ever increases or decreases (the amount mined each year is tiny compared to the amount already in circulation; as is the industrial usage).
The clever people over at The Oil Drum think the price will rise, but then they thought that when oil was $100 a barrel too. I would have to agree that the medium-term trend is upward. Not only have OPEC implemented cuts, but according to the oil drum, "In 2009, production can be expected to decline in Russia, Mexico, Norway and the United Kingdom". That seems rather bullish for oil.
7. crunchy said...
"The only way you can lose your shirt is if they start giving it away. AINT GONNA HAPPEN. No brainer."
The real question here is how high it will go when things really start to get chaotic and the funny money/inflation is in full destruction mode.
8. techieman said...
Crunchy - yes i agree. i have been having " a discussion" with Braindeed [sic] on another posting [the one yesterday about the Swiss] .
Unless you want to finesse the last drop from the move in the medium term you could just do a bit of pound cost averaging and build up a position. if it goes against you hold it until it comes back. Personally i would rather see the lower levels first before jumping in (well putting a toe in).
9. crunchy said...
Oh, and did I mention IRAN????
10. crunchy said...
8. techieman
I am in that is all I care about. Would not want to miss it!
11. techieman said...
fair enough crunchy! I cant afford the luxury of being wrong with the amount of barrells i deal in, but like i say each to their own. If i miss it now i can always get it on the way up, i dont believe it will go off ot the moon from one day to the next at the begining of an upmove - it just dont work like that.
12. braindeed said...
.@ techieman said...
Crunchy - yes i agree. i have been having " a discussion" with Braindeed [sic] on another posting [the one yesterday about the Swiss] .
You are so clever, typing that with you head so far up your own,........... anywa y- I digress.
Broadly speaking I agree with crunchy's supposition (and let's not even think about what the Iran question actually is) and tetchieman could be right in that the 'the market fundementals are sound' and 'it's different this time'.......so, like you say (T), when was the last time oil flew up in price. You can always make a proffesional judgement when to buy........ie you'll see mobs of 'proffesionals' drooling and waving buy orders in a rather demented way ( tip - it's something to look for)
So.....let's leave the debate about supposed effects of 'Peak Oil', the moral dilema of whether centralist or market economy is best, and just get on with juicing a few mils before the financial system implodes.
It's what the ethos of the site demands, I think
13. crunchy said...
11. techieman said...fair enough crunchy! I cant afford the luxury of being wrong with the amount of barrells i deal in,
crunchy- it's all relative. Money management saves all.
11. techieman said...i dont believe it will go off ot the moon from one day to the next at the begining of an upmove - it just dont work like that.
crunchy- Oh really : ) Never?
14. braindeed said...
No he's right crunchy - there's plenty of oil, and there's never been so much political/financial stability, as of at present
(titter)
15. techieman said...
13. Crunchy - nope not at the begining of the "hockey stick". It actually cant if you trade futures because for one thing there are limits on the moves that some of the futures contracts can make in a day. I suppose in theory cash could.
I cant remember ever seeing a blowoff from a low, but if you know different fair enough. You can have a V shape bottom but it wouldnt go from say $40 to $150 the next day.
16. crunchy said...
Thanks techieman I wish I knew differently. I was just thinking that we are headed for some strange market volatility across the board.
However, I have to accept your view as you are the expert and crunchy the chancer! lol.
17. drewster said...
Btw if you're long oil you might also be interested in an oil-services company called Lamprell. They trade on the LSE but most of their activity is in the middle-east where they refurbish oil-rigs. The P/E ratio is very low and they are likely to make a dividend announcement within the next 30 days (based on previous track record). The company is debt-free, has lots of cash in the bank, and a strong order book. Hat tip to MoneyWeek for recommending it recently.
18. Jayk said...
Ah, I remember the days last year when several contributers to this forum insisted that oil would pass $200 a barrel before the end of 2008 and ridiculed anyone who argued with their prediction.......