Crude oil is $86 today.... beginning of the end?

Supply and demand economics in a free market has underlying assumptions like 'rational behavior'. Is OPEC making economically rational choices? Is it not possible for OPEC to make political choices as in we saw what happened to Muammar Qaddafi and we don't want it to happen to us? Would the US engage in economic warfare against Russia?

 

Actually it's BUY puts if you are wanting to benefit from a price decrease, but of course you wouldn't trade just a "naked" option.
Of course Supply/Demand ultimately does have a lot to do with the price (like why the difference between the price of regular gas and diesel is so different than it used to be due to increase in worldwide industrial demand, like from China). However, much of it is influenced in the shorter term by expectations (the market) and speculation (banks and private money institutions). If you try and "guess" short term, good luck. You may get your (Goldman) Sachs handed to you.

It doesn't help that companies will say/report what best serves their shareholders (it's what they are by definition and that's a good thing as long as people realize that is their purpose and motivation. They are not like a registered voter and shouldn't be able to make political contributions like they are a "person"). Take the "corporate news" with some perspective. If you try and interpret their actions, you may not be seeing what they actually believe is best or are actually doing behind the scenes. As a made up, non-factual example: you can't yell "we're doomed" when company says "We are being cautious and reducing our rig count until the price firms up to minimize our exposure". What really is going on is that half their rigs are overdue for maintenance/overhaul and it sounds better than "Most our rigs are borderline safe because we kept them in service too long to maximize our bonus when prices were high and now we're forced to take them offline" There's a lot of noxious market, political and corporate fumes in the industry and there is no resperator smart enough to save you from burning your lungs if you take the plunge and try to outsmart the system.

Let's be careful out there.

PS. While "shorting" can be a good way to loose your shorts and, can you believe it, some people would say it's downright un-American to bet on "failure", displaying their ignorance of how the whole market works. (Sounds like something that would be spewed by the people that control Fox "News" and I'll take my reply off the air).
Covered Calls can be a great way to increase your yield 10-15% on medium growth stocks, even if they continually go up. Proceed with caution and know whats what, but I believe they are considered safe/conservative enough to be the only option that a retirement fund can legaly or by charter trade. Or was it was allowed in a self directed IRA? (Need a whole lot of fact checking on that one. The point was, while you can still make stupid decisions with them, they are a much lower risk than a naked call/put where you can easily go from 60 to ZERO.

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After some thought and considering that there is only like what? 1 casino in Texas, if you want to "bet" with naked Calls and Puts on Oil companies, it's OK as long as you treat it like money you would take to a Casino. Bring only what you can afford to lose and have fun with it.

 

Oil is not falling because of supply and demand in the traditional sense, and it's not being driven down by investors in the traditional sense, it's being intentionally tanked by OPEC to try and shut down the American shale plays. This is not a secret, Saudi Arabia has already said this publicly. In order to kill American shale they are artificially pushing the world market prices down by maintaining current production levels instead of cutting production to offset the increase in supply from American shale fields which causes investors to buy oil cheaper. Supply and demand and market speculation are the direct actors on the price of oil, but the actual cause of the drop is Saudi Arabia trying to maintain it's global market share by tanking the American shale fields. If they build a large refinery in North Dakota American shale oil will be shielded from OPEC because transportation costs are the only reason shale oil sells so far below market prices. I've been told they are building a refinery south of Minot, but building a large refinery is not something that is done quickly.

 

Supply and demand rules the markets. Sure, there are games being played. But supply and demand is the ball they are playing with. Its the only ball that will effect prices. How they choose to effect supply and demand is all background noise to the one thing that will actually get the job done. If you can't effect the supply or the demand, any effort to effect the market will fail. The only reason OPEC can effect the oil prices is because they can effect the supply.

The difference between supply/demand and all the other things everyone talks about (OPEC, investors, economy, etc) is that all of those other things are either effecting...or being effected by...supply vs demand. Nothing changes until the the supply and/or the demand changes...by whatever means.

 

I haul water mostly in eastern North Dakota and just got word about upcoming cuts to hours, pay and possible layoffs early next year. This is only my second winter here (and second year driving trucks) so not very happy to hear this.

 

dont you just love it when one truck driver thinks he is smarter then another truck driver
if any of us were that smart we would be doing that
these smart truck drivers must stop different places then i do
the ones i see remind me of my prison guard days
of course i stayed at a holiday inn express last night

 

Already huh.... Who do you work for?

 

Looking at 6 pump jacks from the one I'm swabbing today that ARE NOT pumping. The one that is is choked back to keep pressure up as its a finicky well. If the oil field starts laying off and equipment Is parked its going to effect banks! Who you think finances all the equipment etc etc? Uh huh....

 

I work in Eagle ford and Permian and lately what I am seeing is when a rig getts done drilling they are not moving to the next site, they are packing up and going home. Fracing still seems to be going strong for the moment but beginning next year I expect to see that start falling off too.

The Saudi's can basically shove a stick in the ground and get oil so their costs are so cheap they can sell oil for $20 bbl and still break even. Nobody can compete with them. I won't go into their reasons for doing this but it's not just to maintain market share. They are punishing several countries for perceived wrongs.