Oil Plays and Ideas

[BadThad]

Post your oil picks here! Even post related plays, i.e. drilling, transportation, refining, etc. Let's try to make money from this oil situation!

Contract Oil Driller: http://finance.google.com/finance?q=hp

[Skydaemon]

ECA thread (http://www.stockmarketcats.com/showthread.php?t=2280)

Not only is encana poised to break up into 2 companies for good reasons. But it then becomes good possibility acquisition targets for other companies. This is also a major holding of a number of dividend funds.

[Ciao]

I just fund this one
http://finance.yahoo.com/echarts?s=FXPT.OB#chart1:symbol=fxpt.ob;range=1y;i ndicator=volume;charttype=line;crosshair=on;ohlcva lues=0;logscale=on;source=undefined
http://www.foxpetro.com/
but then realized is traded on OCT… as I can’t trade that market I let it be….
DYODD…. Could be interesting for long…..|-{ but as I said I haven’t research to support my claim…

agree with Badthad if you get a winner can make a lot money..... by a thoroughly researches IMO they can be found.....:)

for info....I am in HAWK (London) as an investment (i don't only gamble you know ...:lol:) and it give me a lot satisfactions.... their drilling beginning to pay off... and the shares are going up.... in ten months I have double my money (paper money at the mo..)...and expect more to come...

other to look IMHO are solars..... see CSIQ + SOLF etc... .

[Grizzums]

I've always liked the infrastructure plays on energy...okay and a few drillers.


Flr has treated me quite well in past year and just had another set of blowout earnings. I still like JEC, fwlt' and look some others in the space.

Good luck.


Btw- I think oil is going to take a tumble in q 3 and q 4 of this year....tumble ha, but below a hundred bucks.

[BadThad]

I've always liked the infrastructure plays on energy...okay and a few drillers.


Flr has treated me quite well in past year and just had another set of blowout earnings. I still like JEC, fwlt' and look some others in the space.

Good luck.


Btw- I think oil is going to take a tumble in q 3 and q 4 of this year....tumble ha, but below a hundred bucks.

Oil will go down in the fall as demand decreases. That's when I watch the big oil stocks. A good one to play when oil starts going down is VLO, as that's their raw material. It seems to inversely follow the oil price.

[Skydaemon]

swap loophole story (http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080520_524455.htm?chan=top+news_top+news+index _top+story)

If congress forces retirement and pension funds out of oil through the above expect it to crash hard.

On the other hand, congress is apparently playing chicken with opec, passing veto proof legislation to sue opec.

congress votes to sue opec (http://www.reuters.com/article/newsOne/idUSWAT00953020080520)

If they turn off the taps for so much as a week your economy breaks you know. Inventing a reason to poke them in the eye is not the brightest idea.

[BadThad]

OMG, incompetent politicians! :-|| |-{

Why don't the morons sue CANADA? They are the #1 exporter of oil to the US:

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

I've been telling all the people that btch to me about oil companies causing gas prices to be so high.....IT'S NOT THEM! It's the commodity traders..... and now investment funds. Great article! Why does everyone hate oil companies? Hell, without them we'd all be riding bicycles.

[greg1100]

i have a quick question for you guys... could it be the big 4 GS,MS etc. buying to recapitalize to cover there COD ?

[Skydaemon]

i have a quick question for you guys... could it be the big 4 GS,MS etc. buying to recapitalize to cover there COD ?

I don't really understand the question.

When you say "could it", what is 'it' ?

If you mean the rising oil prices staying high, no I don't think that's it. Banks can't really recapitalize by trading anything very well. Their main ways of recapitalizing are by time (because they collect more money on what they lend out than they are charged so over time they make money on it), and by raising capital through share issuance and debt issuance, cutting their dividend payouts, and to some extent by finding people (suckers) to buy their assets from them at good prices. They also make money on various fees and insurance and stuff but basically there isn't much they can do and at this rate it will take them a decade. Their other way of recapitalizing is by calling in outstanding loans and forcing borrowers to pay up in entirety, and if they can't pay, liquidating the securing assets of the borrowers and claiming the proceeds.

If anything it's mutual funds and pension funds trying to make up shortfalls, not the banks directly. That isn't to say the banks don't have trading desks buying oil positions, but the bank trading desks are no bigger than a single big mutual fund or so as far as I know. The collection of funds has a lot more money. Also, it's a haven for institutional foreign investors trying to protect against currency losses in the US. They bring a huge amount of money to the table as well.

But actually oil has a lot of reasons to move higher, mostly related to weird supply disruptions. For example the tankers that move the oil are scarce and we're having problems building more, not the least of which because shipbuilders can't get loans to build the ships until they can sell them. Also there's an extreme shortage of deepwater drilling rigs causing exploration problems, and the existing rigs are near the end of their useful life. A number of countries like russia tax oil companies so badly that they really don't benefit from further exploration anyway. Refinery capacity is also a bottleneck/problem at the moment. And china is slowly buying up global oil resources directly at the drilling source and removing it from the marketplace basically.

There is some untalked about problem with oil exploration. Mainly the companies that could do it aren't and when they do mostly gov'ts around the world have been confiscating, taxing, and renegotiating at will. I follow some smaller oil exploration companies. And in some cases exxon et al have been walking away from oil deposits they had, selling them off because they don't want to develop them. It's highly suspicious. Something is going on. Either exxon is so sophisticated that they know already that the profit margin in these areas is low enough to long term not be worth their time, or something is going on.

It might be that they fear governments basically renegotiating or confiscating. Or that they fear the oil surge right now isn't sustainable and if they build up high cost exploration it won't be profitable when demand breaks and they'll be stuck with a money loser for 25 years. Which if gov'ts do move away from oil somehow, they might to some degree succeed in the next 25 years dropping demand for oil which is the timeframe of oil exploration projects.

Some big oil co's know something anyway because they've been dumping lesser fields to smaller companies and hoarding cash.

[greg1100]

I don't really understand the question.

When you say "could it", what is 'it' ?

If you mean the rising oil prices staying high, no I don't think that's it. Banks can't really recapitalize by trading anything very well. Their main ways of recapitalizing are by time (because they collect more money on what they lend out than they are charged so over time they make money on it), and by raising capital through share issuance and debt issuance, cutting their dividend payouts, and to some extent by finding people (suckers) to buy their assets from them at good prices. They also make money on various fees and insurance and stuff but basically there isn't much they can do and at this rate it will take them a decade. Their other way of recapitalizing is by calling in outstanding loans and forcing borrowers to pay up in entirety, and if they can't pay, liquidating the securing assets of the borrowers and claiming the proceeds.

If anything it's mutual funds and pension funds trying to make up shortfalls, not the banks directly. That isn't to say the banks don't have trading desks buying oil positions, but the bank trading desks are no bigger than a single big mutual fund or so as far as I know. The collection of funds has a lot more money. Also, it's a haven for institutional foreign investors trying to protect against currency losses in the US. They bring a huge amount of money to the table as well.

But actually oil has a lot of reasons to move higher, mostly related to weird supply disruptions. For example the tankers that move the oil are scarce and we're having problems building more, not the least of which because shipbuilders can't get loans to build the ships until they can sell them. Also there's an extreme shortage of deepwater drilling rigs causing exploration problems, and the existing rigs are near the end of their useful life. A number of countries like russia tax oil companies so badly that they really don't benefit from further exploration anyway. Refinery capacity is also a bottleneck/problem at the moment. And china is slowly buying up global oil resources directly at the drilling source and removing it from the marketplace basically.

There is some untalked about problem with oil exploration. Mainly the companies that could do it aren't and when they do mostly gov'ts around the world have been confiscating, taxing, and renegotiating at will. I follow some smaller oil exploration companies. And in some cases exxon et al have been walking away from oil deposits they had, selling them off because they don't want to develop them. It's highly suspicious. Something is going on. Either exxon is so sophisticated that they know already that the profit margin in these areas is low enough to long term not be worth their time, or something is going on.

It might be that they fear governments basically renegotiating or confiscating. Or that they fear the oil surge right now isn't sustainable and if they build up high cost exploration it won't be profitable when demand breaks and they'll be stuck with a money loser for 25 years. Which if gov'ts do move away from oil somehow, they might to some degree succeed in the next 25 years dropping demand for oil which is the timeframe of oil exploration projects.

Some big oil co's know something anyway because they've been dumping lesser fields to smaller companies and hoarding cash.Thank you for your reply.. sorry for the wording of the question..i guess what i was really asking was could they go to the fed window and pick up a few billion and go to there trading desk and buy oil futures?

[Skydaemon]

Thank you for your reply.. sorry for the wording of the question..i guess what i was really asking was could they go to the fed window and pick up a few billion and go to there trading desk and buy oil futures?

Not really sure, I'd be surprised if that was what happened though. They need to maintain certain reserve levels though as well as maintaining liquidity within their operation so I'd doubt they'd gamble that heavily with it. The unspoken thing is that there are a lot of people that expect oil to short term correct downward pretty solidly in q3 or there abouts. It's a long way from being a certain short term bet. If they lost money on betting they'd be going cap in hand immediately for more share issuances and so on. They really don't want to do that.

Regardless of whether they could I doubt they would.

[greg1100]

Not really sure, I'd be surprised if that was what happened though. They need to maintain certain reserve levels though as well as maintaining liquidity within their operation so I'd doubt they'd gamble that heavily with it. The unspoken thing is that there are a lot of people that expect oil to short term correct downward pretty solidly in q3 or there abouts. It's a long way from being a certain short term bet. If they lost money on betting they'd be going cap in hand immediately for more share issuances and so on. They really don't want to do that.

Regardless of whether they could I doubt they would.

will i dont think im the only one that thinks that GS,JPM,MS should be long on oil and buying on margins ..(Senate Commerce Committee Hearing) Mr.Greenburger thinks so as well....

[Grizzums]

Do you guys have this site (http://www.xist.org/charts/en_oilcons.aspx) bookmarked?

[BadThad]

Do you guys have this site (http://www.xist.org/charts/en_oilcons.aspx) bookmarked?

Thanks for that, great site!

[rtace]

Something I Find interesting is today
Oil jumped huge
but DUG ultrashort oil ended up going up at the end of the day
makes sense to start hedging against oil as it gets closer to the predicted resistance levels

but DCR another short oil ETF went down, so I my mind DCR may be buy

Any thoughts

[Skydaemon]

Well per grizz's link DCR terminates june 25.

DUG I'm not sure. Yesterday big oil jumped like 4% when the dow pushed up, could just be a retrace/profit taking though I can't really explain it without research. Anybody have a link to the list of companies it tracks?

Supposedly the jump in oil today was over comments in israel stating that war with iran was inevitable or something. Apparently also today's jump hit some limits on some futures exchanges, some of which prevent a rise of more than $10 in a single day, some don't too though. I'd hold off and see how much more short term this has to run upwards before betting on any correction.

Recall also that tuesday is the next oil report date.

I guess I'm too concerned to enter just now. There is so much money behind oil that it makes sense to let it show a change in direction before entry.

[Grizzums]

Well per grizz's link DCR terminates june 25.

DUG I'm not sure. Yesterday big oil jumped like 4% when the dow pushed up, could just be a retrace/profit taking though I can't really explain it without research. Anybody have a link to the list of companies it tracks?

Supposedly the jump in oil today was over comments in israel stating that war with iran was inevitable or something. Apparently also today's jump hit some limits on some futures exchanges, some of which prevent a rise of more than $10 in a single day, some don't too though. I'd hold off and see how much more short term this has to run upwards before betting on any correction.

Recall also that tuesday is the next oil report date.

I guess I'm too concerned to enter just now. There is so much money behind oil that it makes sense to let it show a change in direction before entry.

I believe DUG uses a variety of different instruments to achieve twice the inverse of the DJ O&G Index ($DJUSEN) - of which it was consistent with today in its objective. (http://stockcharts.com/h-sc/ui?s=$djusen&p=D&yr=0&mn=10&dy=0&id=p28975431170) I know they use swaps but what else, I am not certain.

I also heard that on the floor of the NYMEX there are less and less parties willing to take the short side of any trades creating a bit of an illiquid situation that - when combined with short covering, currency hedgers, and long only funds with money pouring in - manifests volatility that we saw today that can be quite explosive. Israel's saber rattling and Trichet's hawkish tone on inflation indicating an ECB rate hike added fuel to the fire, but still this move seems more speculative in nature than the long move up in and of itself. I think oil has become unhinged from the fundamental drivers of which I viewed as being more (econ 101) supply vs demand related than some others did, albeit the fact that commodities are now viewed as an asset class is certainly part off the equation and the whole "gaming" of the swap market to wiggle around the rules by pension funds and others is a speculative component.

I also heard most of the trading today in the futures market was in near term contracts rather than later term.... that is an interesting shift as of late and of which I can't make much sense of, if true.

I am anxious to see next weeks commitment of traders report to see if their is some sort of noteworthy movement there but without seeing the commercials derivative books, just what kind of meaningful data can be extrapolated and assumptions made from these numbers (http://www.commitmentoftraders.com/reports.htm) in the report?

I remember reading this article (http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_baum&sid=aZBYblEmb.v0) awhile back and it had me scratching my head.

Snippet:

"Asset Diversification'

With the popularity of long-only commodity index funds and the prevalence of total-return index swaps, the definition and quantification of speculation has changed, according to Jim Bianco, president of Bianco Research in Chicago.

Let's say a pension fund, like the California Public Employees Retirement System, wants to increase its exposure to commodities. Calpers, a speculator according to the CFTC, does a total-return swap with Goldman Sachs Group Inc., a hedger. Goldman promises to pay Calpers the total return on the Goldman Sachs Commodity Index and hedges the swap by buying futures contracts. Calpers's speculative bet on commodities gets recorded as Goldman's hedging in the COT report. In so doing, investors circumvent the position limits on non-commercials, says Aronstein, who estimates that passive commodity index exposure in commodities amounts to some $250 billion."

Ida thought the CFTC would have made changes to the rules for speculators by now. Perhaps increasing margin requirements for non commercial traders but for that to have an effect it would have to be done on all the exchanges. ...worldwide. Then again, in Asia, much of the oil trading is done OTC. Also, with the CFTC conducting an ongoing investigation, one would think that the "gaming" would subside (however much of it that may or may not be going on). Logic and reason tells me that if this is a speculative bubble (at least the last 1/3 of the long move up) then if/when "Helicopter Ben" and his dwindling com padres on the committee finally decide to do the right thing and raise rates then oil could come crashing back down towards $100, and fast.....funny (or sad) that $100 a barrel now sounds cheap.

Bottom line for me....I'll steer clear of the oil markets as far as investing and trading for now as I feel more comfortable with natural gas and I still like coal as far as fossil fuels go. Oil...? Take a guess.... BT has been on VLO for a trade but I'll wait for the play on VLO and TSO just a weeeeeeeee bit longer.....perhaps this winter...? :)

Good Luck.

[Skydaemon]

I looked at most of the list of companies (not 100% certain it's updated but should be close, verify if you really have interest). There were like 2-3 that the tickers didn't load for so either my list isn't 100% up to date or I just couldn't find em, looked up the rest.

Nearly all the tickers I looked at look bullish, the majority opened the day by gapping up, powering up, then barely coming back under yesterday's close to barely fill the gap. My take on the divergence with oil today is a multi stock gap fill coupled with profit taking. The fact that they did suggests minor hesitation, but that doesn't strike me as necessarily immediately bearish, nor does it strike me as a real divergence just yet.

They all look bullish. And their divergence from oil today suggests dug is about to drop like a rock if oil goes up again monday and these play catch up.

Favorites in that list::

BHI - uptrending, just hit a golden cross which is hopefully enough to power to the upside
tdw - pullback to halfcandle support

slb and rig deserve honorable mentions, though rig needs not to stall here and slb has some resistance to beat through, although slb did stop on a half candle and rig is on the low part of it's trendline if it does take off it should be a good ride.

BHI Baker Hughes
BJS BJ Services Company
CAM Cooper Cameron
DO Diamond Offshore Drilling
ESV ENSCO International
GSF Globalsantafe
GRP Grant Prideco
HAL Halliburton
HC Hanover Compressor
NBR Nabor Industries
NOV National Oilwell Varco
NE Noble
RDC Rowan Companies
SLB Schlumberger Limited
SII Smith International
TDW Tidewater
RIG Transocean
WFT Weatherford

Also, my take on the speculator thing is all these government officials were beating the war drums about that. They looked up who it was and it was the pension funds of everybody in america doing the speculating and they realized there's no way they can touch it. Closing the loophole through the bank swap contracts would make something probably near half a trillion worth of commodity investments illegal and require them out. That would crush the retirement investments as they tried to flee as well as oil prices.

[Grizzums]

I looked at most of the list of companies (not 100% certain it's updated but should be close, verify if you really have interest). There were like 2-3 that the tickers didn't load for so either my list isn't 100% up to date or I just couldn't find em, looked up the rest.

Nearly all the tickers I looked at look bullish, the majority opened the day by gapping up, powering up, then barely coming back under yesterday's close to barely fill the gap. My take on the divergence with oil today is a multi stock gap fill coupled with profit taking. The fact that they did suggests minor hesitation, but that doesn't strike me as necessarily immediately bearish, nor does it strike me as a real divergence just yet.

They all look bullish. And their divergence from oil today suggests dug is about to drop like a rock if oil goes up again monday and these play catch up.

Favorites in that list::

BHI - uptrending, just hit a golden cross which is hopefully enough to power to the upside
tdw - pullback to halfcandle support

slb and rig deserve honorable mentions, though rig needs not to stall here and slb has some resistance to beat through, although slb did stop on a half candle and rig is on the low part of it's trendline if it does take off it should be a good ride.

BHI Baker Hughes
BJS BJ Services Company
CAM Cooper Cameron
DO Diamond Offshore Drilling
ESV ENSCO International
GSF Globalsantafe
GRP Grant Prideco
HAL Halliburton
HC Hanover Compressor
NBR Nabor Industries
NOV National Oilwell Varco
NE Noble
RDC Rowan Companies
SLB Schlumberger Limited
SII Smith International
TDW Tidewater
RIG Transocean
WFT Weatherford

Also, my take on the speculator thing is all these government officials were beating the war drums about that. They looked up who it was and it was the pension funds of everybody in america doing the speculating and they realized there's no way they can touch it. Closing the loophole through the bank swap contracts would make something probably near half a trillion worth of commodity investments illegal and require them out. That would crush the retirement investments as they tried to flee as well as oil prices.

Yeah, thats a good point. Where did you actually see these holdings? I didn't look long but couldn't find them on a short look...? tia Even on Proshares updated daily ssheet they didn't list DUG's holdings....:~/

[Ciao]

for info.... Business Week..... quite interesting read...|-{
How to Bet on Oil—Whether Bull or Bear
How to Bet on Oil—Whether Bull or Bear (http://www.businessweek.com/magazine/content/08_24/b4088090657633.htm)

[Skydaemon]

Yeah, thats a good point. Where did you actually see these holdings? I didn't look long but couldn't find them on a short look...? tia Even on Proshares updated daily ssheet they didn't list DUG's holdings....:~/

Ah, you know I don't remember where. It was some blog or something. It's not dug's holdings that I was looking up as I expect most etf's just own swaps which are proxies for some index or whatever, so they don't actually own these they own a swap based on it probably.

Nevertheless, the list of companies is the important thing for determining price direction. I considered the source suspect, even if the list looked reasonable to me, so that's why I plastered the caveat on there. Was hoping somebody had a more accurate source.

[Ciao]

for info...

Fears that the price of oil could reach new highs in the coming weeks have intensified following the emergency meeting of the world's oil powers in Saudi Arabia.
Saudi Arabia, the world's biggest exporter of oil, confirmed well-trailed plans to raise production by 200,000 barrels to 9.7m barrels a day - a 30-year high - at yesterday's emergency summit.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/23/cnoil123.xml

[BadThad]

Could oil drop to $60 bbl?

Gas could fall to $2 if Congress acts, analysts say - MarketWatch (http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid=%7B2673C102%2D68E0%2D41D9%2D9C9A%2 D10EE2E723948%7D&dist=MostReadHome)

[Skydaemon]

Oil futures pushed through $140. Very likely $150 in a week. Hold on to those oil plays!