Time to go long crude oil?(if you didn't already)

smeagold

was watching US oil price chart Friday put on $4 in about an hour, due to the continuing Mid East problems, if they persisit oil futures will skyrocket, especially if the contagion hits Saudi Arabia. It's def one to keep an eye on.

ses6jwg

Can anyone reccomend a suitable ISA'ble product that will track crude prices?

I already hold BP and Heritage Oil shares.

Jonbvn

ses6jwg wrote: »

Can anyone reccomend a suitable ISA'ble product that will track crude prices?

I already hold BP and Heritage Oil shares.

Try some of these.

http://www.etftrends.com/2011/01/oil-etfs-2008-all-over-again/

http://www.telegraph.co.uk/finance/markets/questor/3532202/Investing-in-crude-oil-could-be-a-slick-move.html

utigers

CF Junior Oils trust?

Investment objectives


To provide long - term capital growth from a global portfolio of small to medium capitalisation companies specialising in oil exploration and production. There may be occasions in light of adverse market conditions where the Investment Manager chooses to hold a high level of bonds and government securities.

cloud_dog

utigers wrote: »

CF Junior Oils trust

I'd echo this as an option although it is invested in stocks involved in the oil/gas area it has performed very well.

My only problem with the ETFs available is that they often suffer from contango or contasion (or any other 'c' word I can just make up) and often due to the need for them to re-purchase their options / futures they do not gain the benefit of the increase.

Anyone know of a physical fund, i.e. one with huge oil storage tanks somewhere?

purch

Yes Oil ETF's usually suffer from backwardation in the Futures markets, which means rolling contracts forwards is costly.

You should also remember that most of what is being said about Oil at the moment was also being said in 2008, and we all know how that worked out :eek:

rdtrdt

purch wrote: »

Yes Oil ETF's usually suffer from backwardation in the Futures markets, which means rolling contracts forwards is costly.

You should also remember that most of what is being said about Oil at the moment was also being said in 2008, and we all know how that worked out :eek:

You have the contango/backwardation the wrong way round:-

Contango is where distant contracts are more expensive than front month contract, hence when rolling contracts (selling the front month near expiry and buying the next month's contract), a loss is crystallised, since in effect you're selling low and buying high each time. Repeating this month after month crucifies returns; even if you're right on the underlying commodity rising in price you can lose money because of the contango, if rolling contracts over month after month.

If going long, you ideally want to see the commodity in backwardation, so that you profit on each month's contract rollover, in addition to (hopefully) rises in the spot price.

In the middle of December, Brent crude (although not US WTI crude) went into modest backwardation; the first time it's sustained this for a few years. It's currently returned to a slight contango.

*If* near-term supply concerns persist, and speculators also re-inforce this by purchasing near-term contracts (as they tend to), it wouldn't be a surprise to see Brent enter backwardation again imminently IMHO.

Worth being aware that, until Friday's price action, Brent had opened up a record (I think) premium over WTI (US) crude. This closed somewhat on Friday, as WTI rallied twice as much as Brent, so maybe we'll see Brent's premium begin to close further - *if* it did, then it could provide more short term upside, despite WTI's larger contango at present. I guess we'll see.