Oil opportunity

michael_newbie

Hi all,
With the price of oil being so low is this not a great opportunity to invest in shares or funds that are based on oil price ? If so which ? Or wait til prices go lower still ? Don't forget this is a question from a guy who is not an expert on such matters !

Credit-Crunched

michael_newbie wrote: »

Hi all,
With the price of oil being so low is this not a great opportunity to invest in shares or funds that are based on oil price ? If so which ? Or wait til prices go lower still ? Don't forget this is a question from a guy who is not an expert on such matters !

VT82

Question is, what about the people who thought that when oil was down to $50 a barrel?

If the next movement being upwards was as obvious to call as you suggest, people with more experience (and more access to other people's money) than you or I, would have bought them already.

JohnRo

Compared to 18 months ago it's a great time. The problem is the price 18 months ago was at a record level discounting the 2008 spike and is currently still falling, demand is not rising much if at all and the multi year lows in price aren't doing much to alter the situation.
To cap that, the world has just signed up to a comprehensive climate change agreement that could have far reaching consequences for fossil fuels generally and oil in particular, there's a drive towards renewable energy taking hold despite governments dragging their feet and a great deal of progress is being made towards future technologies like fusion power becoming a reality.
If that's not enough the Iranians are now in the process of gearing up to flood international markets with even more of the black stuff over the coming years.
It wouldn't surprise me if oil gets to $20 or less in the mid term then after that who knows.
Perhaps it's as good a time as any to start investing in companies that benefit from a relatively low oil price but I personally won't be taking any bets on the oil price rising rapidly any time soon.

"the stone age didn't end because the world ran out of stone"

Strummer22

A year ago I bought shares in Vestas (wind turbine manufacturer) and shares in few oil and oilfield services companies.

Vestas is the only winner of the lot. Should've gone totally green!

Trouble is, despite Vestas' success, if fossil fuel energy is cheap it lessens the pressure on governments to invest in clean energy. Therefore I now have no idea when to sell my shares in Vestas - will they keep rising or not?

I now have only a couple thousand £ in oil related stocks. I've decided to just hold them until they tick up again. Oil explorers have slashed capital expenditure; the result will be that eventually, supply will begin to fall and oil price will go up. I might have to sit on these shares for 3-5 years though. In that sort of medium term timeframe oil will still power all our planes, most of our cars, most of our chemical industry etc. Longer term, new energy sources can be expected to take over - but oil is still needed for the next couple of decades.

Regarding planes. I am considering buying shares in Easyjet - they'll benefit from low fuel costs and a bit more disposable income in people's pockets, assuming inflation stays low this year. In the same way as oil companies hedge their oil at a lower price than market for future sale, to protect against potential sudden falls, airlines hedge too, buying up to a few years ahead at a fixed price. Buying fuel at oil equivalent $75/barrel for delivery in 2016 looked good in Jan 2014, now, not so much. As the effect of fuel hedging wears off and airlines get more of the real benefit of low fuel costs their earnings should rise. Worth a punt on an airline I reckon, especially one paying a dividend.

bigfreddiel

I would wait till it's going for $1 a barrel, any more than that and it would a gamble.

Hope that helps

CHeers fj

Dan83

If I had any spare cash to lock away for a few years, and had half of an idea, I'd look into shale oil and gas.

bigfreddiel

Dan83 wrote: »

If I had any spare cash to lock away for a few years, and had half of an idea, I'd look into shale oil and gas.

Shale oil and gas is dead and buried, it was only a goer when oil was $100+ a barrel. At sub $30 a barrel it isn't economic to produce

This is why the Saudi's have been over producing to kill off shale gas and oil.

With Iran now in the mix oil price is heading south, it will be $10 a barrel in a few weeks and with summer on its way there will be even less demand.

Also killing demand is renewable energy sources, and the madness of fuelling Drax with wood chips, transported to the UK from USA at great cost - lunacy!

Cheers fj

EdGasket

My money is on Shell and BP heading further south; especially Shell with their over-priced offer for BG about to be voted through next week. They haven't yet suffered the full pain like the miners have.

Glen_Clark

bigfreddiel wrote: »

Shale oil and gas is dead and buried, it was only a goer when oil was $100+ a barrel. At sub $30 a barrel it isn't economic to produce

Its a bit more compliicated than that. What is likely to happen is that the companies who have borrowed heavily to pay for exploration, drilling, planning permission, equipment etc etc will go bust under a sea of debt. But then someone else will buy up their oil wells for fire sale prices, and since they have little debt to service their only extra cost will be maintaining the pumps, so they can pump shale oil profitably for sub $30 a barrel.
(Shell could have done that if they had not been too keen, jumping in too soon, and paying too much for BG)

Dan83

I'm not doubting your knowledge of the market, the reason I thought shale would of been a good investment is, I live in the northwest, there isn't a week that goes by with out it being in the news.