Still Considering Oil

So, after my previous post, I got a bunch of options for investing in oil. Check out this chart.

Click to enlarge

I tracked the USO, DBO, OIL, and DXO ETFs that follow crude. The DXO is a leveraged fund in that its results will be outsized to the direction, plus or minus.
The takeaway is that on a percentage basis, they all, with the exception of the DXO, track each other identically no greater than the current 6.5% differential.

The (DXO) had a near 100% outperformance of the other three as oil rose into July and the downside to it has been roughly 50% worse on the downside to the current prices.

So, what to do. If you think we are in for a very swift spike in oil in the near future, I am leaning towards to DXO. The "on the other hand" statement is that should oil continue to drift lower, your losses look to be 50% greater on average than you will see with the others.

When to buy? If oil drops below $40 a barrel, it is going to be hard not to buy. Consider this, rumors are out there that Israel is planning a strike against Iran nuclear facilities. Want to see an oil super spike?

The thing with oil is that it is only a 50/50 supply-demand equation. The other half is the nut jobs that have most of it. For the past 6-12 months they have been very quiet.....how long has that ever lasted?


Disclosure: None

Comments

[fakir:]

Why do they let fools like you comment is beyond me "Israel planing a strike on Iran" stop talking your book. If you are long and wrong chalk that to the loss column and move on.

2008 Dec 07 07:13 AM

[k45:]

"Investing in oil"? I think you mean "speculating". If you really mean ***investing***, then invest in a quality company and hold it long term. I've held Exxon stock since 1993. That's investing, not speculating.

2008 Dec 07 12:20 PM

[Pipo:]

Oil had the biggest weekly drop since the Persian Gulf War in 1991. Is a major shor squeeze just around the corner? Maybe its a long term buying opportunity.

www.oiltradersblog.blo...

2008 Dec 07 01:25 PM

[tantric55:]

Todd,you may get a 'slightly better than a dead cat' bounce on oil right around the corner but a REAL Rally in Oil or a SECOND Moonshot?
You'd have to wait 4 or 5 years for that.You ask why?
You'd only have had to wait a year or two If there wasn't any movement on ALTERNATIVE Energy(and,believe me,with President Obama(45 days to go)there WILL be-even if Oil goes to $7 a barrel since its not just about lowering our Energy costs but our Security is at stake and since the next administration will not have too many 'Clients' in Texas.However,with the Conditions on the Ground as they are now....the Recession may only last till say,Sept or so of next year....however,we ARE in for Slower Growth for a few years you would agree,right?...for a REAL Rip-Roaring Bull Market in Oil -I MYSELF would not buy any Long term Call Options until 2013 or 2014.
So,Todd,take that advice to just Chalk this one up on the loss column-for now.

2008 Dec 07 04:41 PM

[drone:]

My car desperately needs an oil change but I'm holding off for lower prices.

2008 Dec 07 06:26 PM

[Todd Peterson:]

Thank goodness for the clever folks that "know" that oil will stay low, and that oil-price increases are years away. They are the ones that allow for opportunities by those that invest based on fundamentals. I am buying DXO now.

All you have to do is look at the previous demand and supply figures and you can see that it is headed back up. The only reason it is down now is because we're in a depression or recession. Once it is over, we will once again see that supply does not have a chance of keeping up with demand. It is really very simple. Todd Sullivan is right on target to recommend DXO.

The only thing I'm worried about is that disruptive technology advances will put the oil men out of business for good. And if that happens, as a good American patriot, I'll celebrate it and eat my losses in oil.

2008 Dec 10 02:34 PM

[Todd Peterson:]

Thank goodness for the clever folks that "know" that oil will stay low, and that oil-price increases are years away. They are the ones that allow for opportunities by those that invest based on fundamentals. I am buying DXO now.

All you have to do is look at the previous demand and supply figures and you can see that it is headed back up. The only reason it is down now is because we're in a depression or recession. Once it is over, we will once again see that supply does not have a chance of keeping up with demand. It is really very simple. Todd Sullivan is right on target to recommend DXO.

The only thing I'm worried about is that disruptive technology advances will put the oil men out of business for good. And if that happens, as a good American patriot, I'll celebrate it and eat my losses in oil.

2008 Dec 10 02:59 PM

[mdempsey:]

With oil trading around $45 a barrel I believe OPEC will meet or exceed the 2 billion barrell cut. Also it will be foolish not to think Russia or Venezuela will not follow. They want and need higher prices. We do not have as much control as we think. I bought DXO

2008 Dec 16 01:48 PM