investing in oil

chopchoi · #1 04-14-2005, 05:18 PM

I believe that the price of oil will continue to rise, and i would like to invest in oil. Is there some way that I can purchase a certificate that represents, say, 100 barrels of oil? Also, is there a way to buy an option to buy a certain number of barrels of oil in the future?

Paluka · #2 04-14-2005, 05:21 PM

Futures.

chopchoi · #3 04-14-2005, 05:29 PM

So, where do i go yo buy them?

Paluka · #4 04-14-2005, 06:16 PM

www.cme.com I guess

DesertCat · #5 04-14-2005, 08:41 PM

[ QUOTE ]
I believe that the price of oil will continue to rise, and i would like to invest in oil. Is there some way that I can purchase a certificate that represents, say, 100 barrels of oil? Also, is there a way to buy an option to buy a certain number of barrels of oil in the future?

[/ QUOTE ]

It's down $7 this week. Why do you think it's going higher?

inishowen · #6 04-15-2005, 01:57 AM

Futures trading is tough, bro, not a part time thing. Exxon (xom) and Chevron (cvx) both move basically with the price of oil. Granted, because they are stocks and not the commodity itself, you will experience market volatility along with volatility in the price of oil. Overall though, their beta (measure of volatility relative to the market as a whole) is about half what the broad market is. Check their charts vs the price of oil vs the S&P 500 and you'll see what I mean. Another more broad-based, inherently less risky, choice would be XLE which is a SPDR comprised of the top companies in the oil-oil services sector. With one investment you own xom, cvx and about 10 other oil related stocks representing a de facto bet on the future direction of the oil index. These 3 I've mentioned all trade options so if the underlying stock movements aren't sexy enough for you then you can get your gamble on with an option if you are convinced oil will move higher, quickly. Do your homework and good luck.

crazy canuck · #7 04-15-2005, 08:20 AM

I agree with the previous poster. It is much better to buy stocks that are dependent on the price of oil instead of futures. You'll have less swings and much lower transaction costs.

chopchoi · #8 04-15-2005, 01:58 PM

[ QUOTE ]
[ QUOTE ]
I believe that the price of oil will continue to rise, and i would like to invest in oil. Is there some way that I can purchase a certificate that represents, say, 100 barrels of oil? Also, is there a way to buy an option to buy a certain number of barrels of oil in the future?

[/ QUOTE ]

It's down $7 this week. Why do you think it's going higher?

[/ QUOTE ]

Because (1) the oil producers have the world by the balls and (2) the demand is rapidly increasing as China and India become more developed by the day. And long term, because the supply is limited.

Glenn · #9 04-15-2005, 02:29 PM

What makes you think that isn't already priced in?

DesertCat · #10 04-15-2005, 03:19 PM

[ QUOTE ]
{quote] Why do you think it's going higher?

[/ QUOTE ]

Because (1) the oil producers have the world by the balls and (2) the demand is rapidly increasing as China and India become more developed by the day. And long term, because the supply is limited.

[/ QUOTE ]

All these things have been true for some time. And oil prices have been roughly flat for 25 years, adjusted for inflation

If you adjust the numbers for inflation it looks like betting on higher oil prices during a spike is a fools errand. In 1980, oil prices were close to $100 a barrel in 2005 dollars. Six years later they were $20 a barrel. In 1990 they spiked to $50 a barrel, but back below $30 in a year.

World oil prices aren't that much higher today than they were five years ago. What has happened is the U.S. dollar is depreciating in value, so while Oil prices are only mildly higher in Euros, they have skyrocketed in dollars. In fact, you can argue that most of the U.S. price spikes over the last 30 years have been due to the dollar declining in value.

That said, if you want to bet on a lower dollar by betting on higher oil prices, you'll probably be right as long as we are running big deficits. But there are certainly better ways to bet against the dollar than that.