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Holy Short Squeeze Batman



September 22, 2008 – Comments (2) | RELATED TICKERS: USO

I took a break from work this afternoon to sneak a peak at what oil was doing and I was blown away.  Obviously, I'm about as bullish on oil as they come and I wrote this morning that I strongly believe that the recent government bailouts are bearish for the U.S. dollar and in turn bullish for commodities like oil (see post: Inflation vs. Deflation).  However, I didn't expect such an rally only hours after I wrote this. 

The October crude oil contract today rallied briefly to $130 per barrel before dropping falling to $120 at market close. Today is the final day of trading for the October contract and apparently there were a number of traders caught with short positions in crude oil who had to pay dearly to get out of their contracts.  Good. 

It is difficult to say whether oil will find support at the $120 level.  I suspect it might pull back a little in the short term.  The December contract is a good baramoter of where oil is headed over the next several days.  It was up "only" $5.77 per barrel today to $108.31.

The short-term fluctuations of the market are always hard to predict.  I strongly believe that we will see and I have positioned my portfolio to benefit from triple digit oil in 2009.  My oil plays are fairly conservative.  They will be fine with anything over $80 and absolutely amazing with anything over $100.  Any prices above that are just gravy.

Also of note on the oil front:

-  Mexico May Say Oil Output Fell, Pressuring Congress: Week Ahead (link)

-  Bloomberg: Dollar May Get `Crushed' as Traders Weigh Up Bailout (link)

-  Company blames lagging output in oil sands as it pushes back project to 2014 (link)

- China cuts benchmark interest rates to ensure steady growth (link)



2 Comments – Post Your Own

#1) On September 22, 2008 at 5:51 PM, VIIIMials (26.13) wrote:

Yo Deej, 

How are you positioning yourself to play oil?

are you buying service companies, big oil, and other related stocks?

are you going long the commodity itself through the nymex or using an etf such as USO?

Have you/ or do you have any interest in placing a bet on Nat gas. I own some land in Texas and North La. and Nat Gas exploration companies are offering massive 300-400% premium over the normal lease contracts. 


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#2) On September 23, 2008 at 6:44 AM, TMFDeej (97.68) wrote:

Hi VIIIMials.  Thanks for reading.  While I am extremely bullish on oil, I am at a place in my life with two young children and a wife who is not currently working that has led me to play the sector a little more conservatively than I ordanarily might.

I am staying away from anything that needs super high oil prices, like oil sands and deepwater for now, though I am still fairly optimistic that companies in the latter category like RIG and PBR will do extremely well over the next several years.

I personally am in E&P (Exploration & Production) companies that pay high dividends with low payour ratios right now.

I would love to play the physical commodities themselves, but I have friends who do so and it is a VERY dangerous game if you do not have the time to watch your positions like a hawk.  I work too much to invest that sort of time in it.

Cool stuff about your land in LA & Texas.  It's a great time to own land there.


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