Oil investment question

[DRumsfeld2000]

I am thinking about additional investments in oil. I am looking for a direct invetment in the commodity itself or it forming a majority part of the investment portfolio, perhaps with a 1:2 leverage. Any recommendations appreciated.

[GRG55]

Re: Oil investment question

Stay away from USO. Check the historical tracking against crude to see why...

[LargoWinch]

Re: Oil investment question

I am thinking about additional investments in oil. I am looking for a direct invetment in the commodity itself or it forming a majority part of the investment portfolio, perhaps with a 1:2 leverage. Any recommendations appreciated.

DRumsfeld2000, I know of no ETF who effectively match Crude Oil spot. Like oil master GRG55 said: they do not match the underlying commodity even when not accounting for fees. They are all for short-term speculating (nothing wrong with that).

I came to the conclusion that Oil-related equities is the way to go long-term (not a recommendation - just saying).

Some floated the idea of investing directly in oil wells, but I can just imagine how someone can do that and how fairly illiquid such position would be.

[jpatter666]

Re: Oil investment question

I like OIH. It's a basket of oil servicers -- as oil rises, more demand for them and they seem to have a pretty decent correlation. Also, I don't expect the same level of potential windfall profit scrutiny that the majors might have but one never knows....

DRumsfeld2000, I know of no ETF who effectively match Crude Oil spot. Like oil master GRG55 said: they do not match the underlying commodity even when not accounting for fees. They are all for short-term speculating (nothing wrong with that).

I came to the conclusion that Oil-related equities is the way to go long-term (not a recommendation - just saying).

Some floated the idea of investing directly in oil wells, but I can just imagine how someone can do that and how fairly illiquid such position would be.

[Chris]

Re: Oil investment question

Try OLO.

[jk]

Re: Oil investment question

if you look at the interactive chart linked below, use the slider along the bottom to maximize the time covered back to june '08. if you click on the first label along the top, labelled "oil(eod)", all the curves will get a lot flatter as they will then be graphed RELATIVE to wtic - west texas intermediate. you'll see that both the tracking etf's, dbo and olo, show gradual deterioration, presumably secondary to contango and cost of carry. you'll see that the other prices tracked - for a few of the canadian producers i follow, and for oih - do a fairly decent job of tracking wtic. [and this chart leaves out the dividends, so the producers do even better.]


http://stockcharts.com/freecharts/perf.html?$WTIC,DBO,OLO,OIH,PWE,ERF,SU,cnq,ECA

[LargoWinch]

Re: Oil investment question

if you look at the interactive chart linked below, use the slider along the bottom to maximize the time covered back to june '08. if you click on the first label along the top, labelled "oil(eod)", all the curves will get a lot flatter as they will then be graphed RELATIVE to wtic - west texas intermediate. you'll see that both the tracking etf's, dbo and olo, show gradual deterioration, presumably secondary to contango and cost of carry. you'll see that the other prices tracked - for a few of the canadian producers i follow, and for oih - do a fairly decent job of tracking wtic. [and this chart leaves out the dividends, so the producers do even better.]


http://stockcharts.com/freecharts/pe...ERF,SU,cnq,ECA

Thanks jk, that is useful.

Of course ECA is mainly NatGas and not Oil and seriously lagged both the oil producers and the TSX in 2010.

The real question remains: Is WTI $150 or WTI $50 next...

[charliebrown]

Re: Oil investment question

I have the same questions regarding nat gas. Seeing as it is so cheap now, what can I buy and hold for a period of years that will move up and down with the price of gas? Forget UNG. Ughh. I have heard rumblings that fracking may not be panacea that it is said to be. It may be that a fracked field may deplete much faster than a traditional field. So we need a gas producer who has lots of gas in the ground and not potential from fracked fields. Any ideas? SJT?

[GRG55]

Re: Oil investment question

I have the same questions regarding nat gas. Seeing as it is so cheap now, what can I buy and hold for a period of years that will move up and down with the price of gas? Forget UNG. Ughh. I have heard rumblings that fracking may not be panacea that it is said to be. It may be that a fracked field may deplete much faster than a traditional field. So we need a gas producer who has lots of gas in the ground and not potential from fracked fields. Any ideas? SJT?

Despite the increase in international liquified natural gas [LNG] production, blue water transportation and marketing, natural gas is still a continental market. And it will stay that way unless and until a sufficient volume of LNG cargo starts to trade between the players, especially across the Pacific [East of Suez] and Atlantic [West of Suez] basins [arbitrage]. What that means is if you are investing in any aspect of the North American natural gas market today the supply, transportation and and consumption inside North America is pretty well all that matters.

If you are concerned about "fracked" [sic] fields you are going to have a tough time investing in North America. There is a mis-conception that hydraulic fracture stimulation is limited to shale gas well completions. That is incorrect.

Hydraulic fracture stimulation of hydrocarbon producing wells was invented in the research labs of Standard Oil of Indiana [later known as Amoco Corporation, and now part of BP]. The first field scale experiments were done in Stanolind's Hugoton gas field, Kansas in 1947. Today there is hardly an oil or gas well completion of any kind in North America that does not involve hydraulic fracture stimulation. Very few wells that could be drilled today in North America are commercially viable without stimulation.

[Shakespear]

Re: Oil investment question

There is a mis-conception that hydraulic fracture stimulation is limited to shale gas well completions. That is incorrect.

This indicates that the resource they are going after is "the bottom of the barrel" in quality. Then if the company does not have quality people on staff they blow millions doing these operations and do not getting back the money invested into it. I am not saying this is the norm but I do hear more about this type of situations through the grape vine.

Looking forward I would guess that they will be attacking riskier and riskier plays which will require smarter people. That's the view on the ground.

[DSpencer]

Re: Oil investment question

if you look at the interactive chart linked below, use the slider along the bottom to maximize the time covered back to june '08. if you click on the first label along the top, labelled "oil(eod)", all the curves will get a lot flatter as they will then be graphed RELATIVE to wtic - west texas intermediate. you'll see that both the tracking etf's, dbo and olo, show gradual deterioration, presumably secondary to contango and cost of carry. you'll see that the other prices tracked - for a few of the canadian producers i follow, and for oih - do a fairly decent job of tracking wtic. [and this chart leaves out the dividends, so the producers do even better.]


http://stockcharts.com/freecharts/perf.html?$WTIC,DBO,OLO,OIH,PWE,ERF,SU,cnq,ECA

Thanks. Very useful.

[charliebrown]

Re: Oil investment question

Thank you, I may be imprecise in my use of the word "Fracked" . It may be more accurately stated that I am woried about shale gas production.

I just remember reading somewhere that these "new" gas fields may deplete at a rate faster or more non-lineraly than traditional fields. Perhap the "new" gas fields that I am refering too, refer to a "fracked" shale gas, and not just any "fracked" field. I remember the article was maybe two to three years ago just as 100 yrs of reported reserve gas within the U.S. was suddenly "discovered" This article pointed out that the 100 year estimate was based upon current delivery rates and a normal depletion curve. The author stated the depletion curve for these "new" fields may be much steeper.

Hopefully I saved the article off, and I can find it again.

[charliebrown]

Re: Oil investment question

This is not the same article, but a quick google search turned up this which is what I am speaking of.
You are right GRG, it is shale gas.

So rephrasing my question. Who is a north american producer of Nat Gas with a lot of proven reserves which are not shale gas. Is the correct question.

http://www.energybulletin.net/node/46776

[GRG55]

Re: Oil investment question

Thank you, I may be imprecise in my use of the word "Fracked" . It may be more accurately stated that I am woried about shale gas production.

I just remember reading somewhere that these "new" gas fields may deplete at a rate faster or more non-lineraly than traditional fields. Perhap the "new" gas fields that I am refering too, refer to a "fracked" shale gas, and not just any "fracked" field. I remember the article was maybe two to three years ago just as 100 yrs of reported reserve gas within the U.S. was suddenly "discovered" This article pointed out that the 100 year estimate was based upon current delivery rates and a normal depletion curve. The author stated the depletion curve for these "new" fields may be much steeper.

Hopefully I saved the article off, and I can find it again.

You may want to go back and read the natural gas related parts of this post by EJ from November 2009:
http://www.itulip.com/forums/showthr...Cycle?p=131461

Peak Cheap Oil Update - Part II: The First Peak Cheap Oil Cycle

ASPO-US Conference Denver 2009 Trip Report and analysis
• Peak Cheap Oil Cycle has displaced the FIRE Economy Bubble Cycle
• Natural Gas Mini-Bubble or
• Why banks want us to believe the U.S. has 100 years of natural gas reserves and
• The U.S. can’t fuel a fleet of liquid natural gas (LNG) powered trucks and reduce our dependence on foreign oil by 30%
• Oil prices will spike to above $150 before 2012

[DRumsfeld2000]

Re: Oil investment question

Thanks for all the feedback.