Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Two Strategies to Profit as Crude Oil Price Drops Below $50 a Barrel

Commodities / Crude Oil Jan 08, 2015 - 03:37 PM GMT

By: DailyGainsLetter

Commodities

The energy sector was dismal in 2014 and it is looking like we could see more of the same for this year. If you are long on oil, you may want to read this, as oil prices could move lower and there are two strategies you can consider to profit from their drop: put options and futures.

Currently, we have the excessive supply overriding the declining demand as the global economy struggles along. China just announced its gross domestic product (GDP) growth would fall to seven percent this year; however, I think the real figure is likely already below seven percent, as there’s some fudging of the numbers. The eurozone could dwindle into another recession or see flat growth, and Russia is clearly heading for another recession in 2015, as long as President Putin continues to refuse to conform to global demands.


The lackluster demand will continue to pressure oil prices.

On the supply end, there’s the massive flow of shale oil that will ultimately help to make the country independent of OPEC (Organization of the Petroleum Exporting Countries) oil, but will pressure oil prices in the foreseeable future.

OPEC is refusing to cut production, especially its largest member, Saudi Arabia. This is likely in an attempt to try to force the U.S. to cut its shale production and send oil prices higher. We are already beginning to hear about capital expenditure cuts by oil companies in the country.

In addition, non-OPEC oil producers Russia and Iraq have announced their intentions to increase oil exports, which will place further pressure on the price of oil. Of course, these two countries need the money and they have abundant oil reserves, so they care little about oil prices at this time.

The chart of West Texas Intermediate (WTI) crude oil spot prices below shows a dangerous decline to $50.87 on Monday morning, a five-and-a-half-year low. Recall when oil prices hung at around $70.00 and there was the feeling it would hold at that level. Of course, the downward pressure on the chart continued and oil prices subsequently broke $60.00 and then $50.00, reaching $47.93 as the markets closed yesterday (the first time it’s been below $48.00 since April 2009). We are now faced with a real possibility of oil prices moving even lower, based on my technical analysis. The higher-priced Brent oil from the North Sea has also declined, reaching $50.88 yesterday at close (the lowest it’s been since April 2009).

Light Crude oil - Spot Price (EOD) CME

Chart courtesy of www.StockCharts.com

As we move forward this year, I see little support for oil unless the global economy can reverse and expand. It doesn’t look that way at this time, so I’d expect oil prices to falter.

I would not be a buyer at this time. However, a decline to the $40.00 range may make it more interesting to play the long side for speculators; albeit, the long-term chart shows very weak oil prices are possible.

If investors play the trend, there appears to be more downside risk at this time. There are two possible strategies investors could consider: an example to play the downside could be via put options on an oil-based exchange-traded fund, whereas more experienced traders could consider playing the downward pressure on oil prices via the futures market.

http://www.dailygainsletter.com/investment-strategy/two-strategies-to-profit-as-oil-drops-below-50/3572/

This article was originally published at dailygainsletter.com

© 2015 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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

6 Critical Money Making Rules