Longhorn Dave: Yeah, “all things being equal” doesn’t much apply when speculating a decade ahead in the oil biz. You raise good points, I agree we can’t be sure what effect evs will have on the oil biz long term. OTOH, it is all but unprecedented for petroleum fuel to have a competitor at all. It is hard to see how evs will be anything but some degree of drag on the oil biz long-term.
Fotheringay-Phipps: Nothing makes a lesson stick like not making money.
I don’t think I have a feel for how far in advance the market anticipates changes. Production isn’t projected to drop significantly until almost the end of the year. Stockpiles will still be at historic highs at that point. The end of the glut seems fairly distant from here.
I’ve seen the reports of countries proposing forming some ad-hoc cartel, but so far those deals have not worked out, and I don’t really expect it. If countries can hammer out a deal to cut production, I will have to incorporate that outcome into my worldview.
If you’re buying oil futures contracts, then the market is anticipating the price of oil at that time the contract executes. If you’re buying stock in an oil-dependent company, then the market is anticipating the price of oil over the entire future of that company’s projected earnings.
But again, if you wait until those countries actually announce the deal, then it will already be priced in, and you will have missed the bottom. And even if you don’t wait that long, the market price day-to-day reflects (among other things) the likelihood and potential scope of any such deal.
Essentially you’re working against the Efficient Markets here. You can beat the Efficient Markets by being smarter than the markets or by luck. But you haven’t put forth any theory that you think the market is wrong about and you’re right about (with specific regards to your ability to time the bottom), so it’s just luck remaining.
Well Goldman Sachs thinks the prices will go back down, for this reason. (Of course, when oil was over $100, GS predicted it would go to $200.)
There is a delay in the impact of development cuts. There’s been an enormous amount of capex cuts by major producers, but this doesn’t impact actual production until later on. The question is if the amount of cuts already in place (plus potential future cuts from OPEC and others) is enough. Everyone places their bet.
Yeah, back in June we saw prices rise to $60 a barrel, and look how that turned out. I’m going to do some more research. For now my position is: the glut ain’t over. If I am wrong and missed my chance to make a profit, at least I had the opportunity to chat about it with people who knew better.
To continue on that theme: the IEA has announced that the price of oil “may have bottomed”. But check out this chart of oil prices which highlights the times various analysts called bottoms going back almost two years. They’ve all been wrong!
This time could be different, but again, demand growth is ho-hum and supply cuts, while anticipated and perhaps priced in, may not materialize the way some people hope. We’ll see.
I still admit that I have already missed a chance to make 10% off all my picks. Perhaps not the last chance…