Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Tec Stocks Sector Set For A Rebound? - 16th Oct 18
Real Estate Transactions are Becoming Seamless with Blockchain-Powered Data Sets - 16th Oct 18
Important Elements of a Viral Landing Page - 16th Oct 18
Stephen Leeb Predicts 3-Digit Silver and 5 Digit Gold?! - 16th Oct 18
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

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.


© 2005-2018 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