Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Profit From Low Crude Oil Prices

Commodities / Oil Companies Nov 03, 2013 - 03:36 PM GMT

By: Investment_U

Commodities

Sean Brodrick writes: This Halloween season, the scariest story for energy investors is how the price of crude oil keeps sliding. But don’t worry – there are ways to profit when oil prices go down.

But first, why are oil prices slumping anyway?


•Production Is Booming. In fact, oil production during the week ending October 18 averaged nearly 7.9 million barrels per day (bpd). That’s the highest U.S. weekly output of crude oil since March 1989.

•Supplies Are Building. According to the U.S. Energy Information Administration, crude oil inventories recently rose for five weeks in a row. The buildup brings stockpiles to within 20 million barrels of a record high.
•Economic Growth Remains Weak. Although the U.S. economy is growing, the bad news is the data points to weaker economic growth. In particular, private payroll growth recently came in way below expectations. Factory orders also slowed, and housing is losing steam.
•Iran May Be About to Open the Oil Floodgates. Western sanctions have slowly squeezed Iranian oil exports by 1 million bpd. But Iran is now reaching out to its former oil buyers. It is telling those potential buyers that it’s ready to cut prices if Western sanctions against it are eased. And that might happen because Iran is becoming more cooperative with the West on its nuclear program. President Hasan Rouhani, who was elected in June, is opening the door to a possible diplomatic resolution.

If Iran can sell a lot more oil – and sells it at a discount – that would send oil prices lower in a hurry.

To be sure, the best cure for low prices is low prices. Texas oilmen are already warning that many energy producers need oil prices around $96 a barrel to profit on deposits, including the Cline Shale and the Northern Mississippian Lime. And if oil prices drop to $80 per barrel, parts of the oil-rich Permian zones beneath Texas and New Mexico will become real money-losers.

If prices fall below the cost of production, we’ll see producers start to shut in wells. They will only restart those wells when oil costs go higher again.

But in the meantime, it sure looks like oil is breaking down from its recent range, and we could see it test support around $90… or lower.

This leaves many energy investors scratching their heads, wondering how to play such volatility.

Here are three suggestions for playing low oil prices:

•Buy Dividend Payers on the Dips. Many energy companies pay very nice dividends, and those dividends can be secure even if the share price is riding a roller coaster. So, use price pullbacks to your advantage. Wait for a dividend payer to get near the bottom of its range, and then buy. Even if the company’s share price goes lower, you’ll be paid handsomely to be patient.
•Buy an ETF of Stocks That Rise as Oil Prices Fall. One example would be the iShares Dow Jones Transportation Average (NYSE: IYT). It makes sense that transportation stocks will benefit from dropping oil prices, as fuel is a major cost for trucking firms and other transportation companies. Just be prepared to ditch the fund when oil prices go higher again.
•Buy a Refiner. As oil prices weaken, the profit margins of oil refiners can widen to Grand Canyon proportions as they see lower input costs. This is especially true now that so much of refined oil products are exported overseas.

These are just three of the many ways to play a pullback in oil prices. It’s hard to predict the price of oil. But energy investors shouldn’t let recent price volatility scare them this Halloween season. There are plenty of treats – profits – to be bagged as well.

Good investing,

Sean

Source: http://www.investmentu.com/2013/November/how-to-profit-from-low-oil-prices.html

http://www.investmentu.com

Copyright © 1999 - 2013 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in