Oil futures are forecasting about 50% upside from here by the end of the year. (Go Google the "Contango Curve.") However, oil could fall as much as 50% before it rises again, depending how long quarantines go and how the industry reacts to the storage shortage. So when playing oil, I'm thinking I'll take a small starter position at $20 per barrel and triple the position at $15, and then triple it again at $10.
Bearish case: oil storage is running out, and the world is on track to run out of storage within a couple months. Russia and Saudi Arabia show no sign of ending their price war, so it's quite possible that the biggest producers just keep pumping more oil until we hit the storage limit.
Bullish case: To keep pumping that long would be irrational, however, so I'm betting it doesn't go that far. In fact, there are already signs today that Texas oil drillers will cut production. As supply shrinks because US producers are forced out of the market, oil prices may find support and storage may become less of an issue.
Keep in mind that this is a long-term play.
oilprice.com/Energy/...Halt-Production.html
Bearish case: oil storage is running out, and the world is on track to run out of storage within a couple months. Russia and Saudi Arabia show no sign of ending their price war, so it's quite possible that the biggest producers just keep pumping more oil until we hit the storage limit.
Bullish case: To keep pumping that long would be irrational, however, so I'm betting it doesn't go that far. In fact, there are already signs today that Texas oil drillers will cut production. As supply shrinks because US producers are forced out of the market, oil prices may find support and storage may become less of an issue.
Keep in mind that this is a long-term play.
oilprice.com/Energy/...Halt-Production.html
評論:
Although crude oil prices are dipping tonight, I'm seeing lots of headlines tonight that may help stabilize prices here. Russia has opted not to increase production. The US is finally putting real pressure on Saudi Arabia. The US is renting storage space in the strategic reserve to oil producers in order to alleviate the storage shortage. China inventories are actually decreasing as refineries reopen. I think $20 might prove to be the bottom.
評論:
This proved to be an excellent bet. I am glad I increased my position this morning because of all the headlines last night.
