Crude oil at a record low - investment opportunity?

Chimpski

Hi there all,

now first let me say my financial knowledge is next to zero (but for the few nuggets of wisdom that I've absorbed from this site and it's users), and what I'm writing below isn't an overly serious suggestion.

Anyway, watching the news these days you won't have failed to notice that Crude Oil is at an all time low, down from a record high - currently around $36(ish) per barrel down from a whopping $140(ish).

Of course Oil is usually traded in huge quantities, by equally huge companies, but at the current price I could probably afford a couple of barrels maybe even three or four! - the questions are: Is it possible for individuals to buy Crude Oil and sit on it until the price rises again? How would you do it? What charges would have to be accounted for? Could individuals group together to do this?

(it is silly season after all).

Happy [insert festival here] to all.

Rob.

cheerfulcat

Hi, Rob,

It's not an " all time low " though - it traded at $20-ish ( inflation adjusted ) for many years. Recent prices have been very high, especially in the last two years or so. But to answer your question - it's pretty impractical to buy actual barrels of oil but you can trade on the price by buying an ETF ( ticker CRUD ) or something like the Junior Oils Trust. You could also look at individual oil exploration companies, though they don't necessarily move with the oil price.

Chimpski

cheerfulcat wrote: »

it's pretty impractical to buy actual barrels of oil but you can trade on the price by buying an ETF ( ticker CRUD ) or something like the Junior Oils Trust.

Indeed, not sure DHL would relish the chance to drop off four barrels at my door on a cold Monday morning - can you elaborate on the EFT option though, that sounds interesting (assume I know nothing).

tradetime

You can trade oil futures, such as Brent Crude on the ICE exchange or Nymex on CME Globex, personally I'd say not practical unless you are a futures trader already. Cheerfulcat's suggestion is much more practical for the average investor / wouldbe trader. ETF's available if you have access through your broker to US excahnges are DBO, OIL, USO, there are also leveraged products DXO which is an ETN (there are particular risks with ETN's that need to be considered) and UCO which is an ETF these seek to return 200% of the move in crude oil. Of course bear in mind leveraged products work well if you have direction right but can seriously damage your port if you are wrong on direction. I would have to look up symbols for LSE traded etf's but possibly someone else could suggest those.


ETFS Brent 1mth Sterling ETF (OLBP-LSE)ETFS Brent 1yr ETF (OSB1-LSE)ETFS Brent 2yr ETF (OSB2-LSE)ETFS Brent 3yr ETF (OSB3-LSE)ETFS Brent Oil ETF (OILB-LSE)ETFS Leveraged Crude Oil ETF (LOIL-LSE)

ETFS WTI 1yr ETF (OSW1-LSE)ETFS WTI 2mth Sterling ETF (OLWP-LSE)ETFS WTI 2yr ETF (OSW2-LSE)ETFS WTI 3yr ETF (OSW3-LSE)ETFS WTI Oil ETF (OILW-LSE)
You'd have to research those to find out what suited your purpose, I have no experience with LSE listed products.


With ref to your buying barrels, not sure about Brent but Nymex is sold via the large contract for physical delivery symbol for Nymex Crude CL plus the month symbol and the year currently CL F9 or the e-mini QM F9 for the front month January contract.the large contract is for 1000 barrels, whilst the E-Mini is for 500 barrels. (not 100% sure if the e-mini is a physical delivery contract, or cash settled I'd have to check, but again as cheerful says, taking delivery is pretty impractical)

Blah99

Might well be easier to just use a spread betting firm like IG to take a position on the commodity..

opinions4u

Do you think the price of oil is likely to rise as demand for oil falls (as it will during a prolonged worldwide recession)?

You might make a small fortune, but it is a very high risk form of investing and you might lose a large percentage too.

tradetime

opinions4u wrote: »

Do you think the price of oil is likely to rise as demand for oil falls (as it will during a prolonged worldwide recession)?

You might make a small fortune, but it is a very high risk form of investing and you might lose a large percentage too.

Personally I think if you have a 5 year time horizon now is probably a great time to start scaling into oil. You are quite correct demand is falling and will most likely continue to fall for some time to come, but so will supply, the market treated the recent opec cut with contempt, so much so that opec are talking about holding a meeting in mid January, much earlier than the scheduled March meeting, to discuss further cuts. With crude at these prices, no-one is making money, expansion projects are being shelved supply from smaller less profitable fields is being suspended. If and when the economy starts to pick up, the rise in demand will far outstrip supply.

cheerfulcat

Chimpski wrote: »

Indeed, not sure DHL would relish the chance to drop off four barrels at my door on a cold Monday morning - can you elaborate on the EFT option though, that sounds interesting (assume I know nothing).

Hi, Chimpski,

An Exchange Traded Fund ( ETF ) is a tracker fund - it just tracks a given index. CRUD is actually an Exchange Traded Commodity ( my mistake ) - same idea but a different structure. If you google " ETF CRUD " you'll find the homepage for ETF Securities, which is the administrator. Sorry, can't do links right now.

The Motley Fool ( fool.co.uk ) has two very active Oil & Gas boards - well worth a look.

tradetime

Thanx also for that, I had a link to that site a while back and lost it.

To OP as with my suggestion / mention of ETN's be aware there can be additional risks involved in using ETC's that you need to be aware of and accept pertaining to counterparty risk

lomhicy4

Does anybody know how LOIL is supposed to work?

I know leveraged ETF do not always appear to work the way you might think, and there is a time difference between the tracked subindex and London.

However on Feb 5, LOIL has the following figures

Previous close $4.6, Open 4.35, High 4.42. Low 4.17 closing at -7.83% after being negative all day.

However DJAIGCL the tracked sub-index on the same day, has been positive nearly all day, is current +2.11 and has never got lower than -2% all day.

So for the single day Feb %, there is a difference of +2*2.11 + 7.83 = over 12% difference.

What is going on please? Is LOIL just a scam? I know on some American websites people say they should be banned, but would appreciate some more info here if possible

lomhicy4

Oh I forgot to mention - UCO seems to track perfectly intraday, although is based in New York