I like Oil

[Mulligan]

Things have changed rapidly the past couple years, Brat. The U.S. has actually become the number one producer of oil in the world. Of course if prices continue to drop, that may not last.

http://www.investopedia.com/articles/active-trading/100714/worlds-top-oil-producers.asp


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[Brat]

I wouldn't mind at all if the more expensive oil production decreased as I have concerns about the consequences of fracking (the injection activity) and transportation of fracked oil and tar sands oil by rail, and offshore drilling. Oil in the ground are resources to be use in the future if needed.

Hard to imagine that we produce more oil than Russia or Saudi Arabia. The others that I mentioned, and Russia, are more dependent on that income than we are.

 

[audreyh1]

Hard to imagine that we produce more oil than Russia or Saudi Arabia. The others that I mentioned, and Russia, are more dependent on that income than we are.

I think a lot of US people have no idea this is true.

 

[aja8888]

I think a lot of US people have no idea this is true.

We also burn up about 25% of the refined products consumed in the world.

We still need 30% (a quickly changing percentage) of imported oil to add to the 9 million barrels per day we produce. Canada and Mexico have recently been our largest foreign suppliers. We are not a dependent on OPEC as in previous years.

 

[dallas27]

Funds are on the way to my accounts, i'm close to getting in on UCO. I think in the next week or thee there will be a sky is falling panic, that will be my signal.


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[imoldernu]

Price is not so uusual. Perspective:

 

[Fermion]

Except that we have had about 25% inflation since 2005...healthcare costs, other costs for oil workers are well up from 2005 levels, yet oil is back to 2005 costs.

But I am waiting for my $0.10 hamburger to come back like in the 50s.

 

[audreyh1]

Price is not so uusual. Perspective:

I think your graph shows that it is unusual. 2008/2009 we had a massive financial crisis and that was a very unusual time. That we are suddenly back to those levels now without crisis also makes this time unusual IMO.

 

[bld999]

While it is true that we currently produce more oil than Russia and Saudi, my impression is that Saudi could open the valve and make us look like punters if they chose.

 

[Running_Man]

I think your graph shows that it is unusual. 2008/2009 we had a massive financial crisis and that was a very unusual time. That we are suddenly back to those levels now without crisis also makes this time unusual IMO.

Agree with this statement, while oil is a commodity that is volatile this recent move is very much having an impact. I am interested to see if the recent lows in the oil stocks hold, that will say quite a bit. Right now they are reminding me of early 2008 when banking stocks for a bit of time rallied but then came September - December 2008 and an absolute collapse in those stocks.

 

[redduck]

Funds are on the way to my accounts, i'm close to getting in on UCO. I think in the next week or thee there will be a sky is falling panic, that will be my signal.


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What causes you to think that in the next three weeks there will be "a sky is falling panic"?

 

[target2019]

What causes you to think that in the next three weeks there will be "a sky is falling panic"?

If I look at a few companies, it appears the sky has fallen for some:

FCX Freeport-McMoRan Inc down 55% from 1-yr high
CVX Chevron down 25%
XOM Exxon down 20%
PBF PBF Energy down 6%

and the sector:

XLE Energy Select Sector SPDR (ETF) down 26%

It appears to me that the energy sector is poised for another leg down. The crude oil price is falling/recovering/falling, and the news of lack of storage capacity in US is growing. What else? Toss in a middle east election, terror activity, and pending interest rate hike in US.

Mix it all up and don't look up!

 

[Fermion]

UCO has dropped almost steady from $40 to $6.

What a great short that would have been.

 

[REWahoo]

This article attempts to identify the oil companies that will be hurt the most/least:

ConocoPhillips may withstand price disruption better than its shale competitors

 

[Lakewood90712]

WTI for April trading below $43 on the nymex evening session ( 6pm) . API released inventory data at 5pm , I think EIA releases data tomorrow.

 

[audreyh1]

WTI for April trading below $43 on the nymex evening session ( 6pm) . API released inventory data at 5pm , I think EIA releases data tomorrow.

Right.

The stock market seems to be ignoring this new move down recently. At some point it will probably panic again.

 

[FIRE'd@51]

Right.

The stock market seems to be ignoring this new move down recently. At some point it will probably panic again.

I suspect the market realizes that lower oil prices on balance help the economy. IMO, the earlier negative reaction was due to the quickness of the oil-price decline. If oil prices were to double in the next couple of months, the market would likely drop severely.

 

[Running_Man]

This article attempts to identify the oil companies that will be hurt the most/least:

ConocoPhillips may withstand price disruption better than its shale competitors

Inherent in this article and in many of the comments in this thread is the idea that of course oil will go back up in price. What is the best gauge of price? What the market is selling it for in most cases. I think $70 oil is no more or less likely than $30 oil.

As for COP it is at 62 it is presently paying out 7.8 percent of it's SALES as dividend. If price stays down here for many more quarters despite all they say, just like the banks did in late 2008 after quarters of saying their dividends were safe the dividend will be cut. Cutting COP dividend 50% will result in a $30 dollar stock, so the present investment in COP in my mind implies a belief WTI will recover to 70-80 dollars in order to make the investment work out.

As a dividend investor myself I find the most important aspect of my investing is to avoid stocks that may have to cut the dividends. This will result in missing at times some very good recoveries in stock prices.

 

[aja8888]

We are starting to see some of our clients stop projects and thin out their workforces. One client of ours, Quicksilver Resources near Fort Worth, filed for bankruptcy yesterday. These guys have some nice leases in the Barnett Shale (mostly gas) and some oil south of there.

As Running_Man said above, we are not yet seeing the worst of this. I suspect if oil drops further and stays low for an extended period of time, the dividend payers will be forced to cut payouts. The refiners will be the winners in this mess.

 

[Mulligan]

We are starting to see some of our clients stop projects and thin out their workforces. One client of ours, Quicksilver Resources near Fort Worth, filed for bankruptcy yesterday. These guys have some nice leases in the Barnett Shale (mostly gas) and some oil south of there.

As Running_Man said above, we are not yet seeing the worst of this. I suspect if oil drops further and stays low for an extended period of time, the dividend payers will be forced to cut payouts. The refiners will be the winners in this mess.

I just don't understand the integrated oil stock prices....13 months ago I bought Chevron a bit under $108 at $100 barrel. And now at sub $45 oil Chevron is trading over $106... Doesn't make sense to this person.


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[aaronc879]

I just don't understand the integrated oil stock prices....13 months ago I bought Chevron a bit under $108 at $100 barrel. And now at sub $45 oil Chevron is trading over $106... Doesn't make sense to this person.
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I'm no expert with regards to oil companies but doesn't Chevron refine the oil? It shouldn't matter what the cost of crude oil is, Chevron refines it and sells it with the same profit margin(I assume). I would think their profits go up and down based on the amount they refine not the price they pay for the crude.

 

[Lakewood90712]

I'm no expert with regards to oil companies but doesn't Chevron refine the oil? It shouldn't matter what the cost of crude oil is, Chevron refines it and sells it with the same profit margin(I assume). I would think their profits go up and down based on the amount they refine not the price they pay for the crude.

Not that simple. The refiners margin gets squeezed when crude is high , finally now making good profit on refining and marketing . The stock price is indicative of the earnings and dividend. Chevron being an integrated oil does a lot of exploration worldwide for both oil and gas. They also make money buying swapping and selling oil and gas properties. They make lot's of money on oil and gas when neither touches their refinery.

On the final end of marketing, that soda, beer or candybar at the foodmart at your local gas station makes for more retail profit than the gasoline they sell you.

I own Chevron in my portfolio. Just my 2 cents worth

 

[dallas27]

Bought into UCO with 1% of portfolio. Let's see where this train goes.

 

[nuke_diver]

Was giving RDS some serious consideration given the current yield and value but was still in the research phase...up 2% today compared to 0.15% on XOM. So will see what monday brings and do some more research

 

[FUEGO]

Interesting tidbit from Yahoo finance: http://finance.yahoo.com/news/robert-shiller-buy-oil-124131252.html

Robert Shiller says "buy oil".

His reasoning echos mine. "Prices are very low and there are a lot of reasons to assume that they won't stay low. That's what I've bet on." I don't see demand shifting away any time soon, and if prices stay low, there will be some substitution effect to use cheap oil.