Oil Prices
US OIL FUND ETF
NYSE: USO
May 17
no chart
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Last price34.21Prev Close33.87
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Change0.34% Change1.0%
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Open34.23Volume5,677,900
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Day Low33.86Day High34.29
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Bid34.17Ask34.18
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52 Wk Low29.4652 Wk High36.84
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Market Cap19,675ExchangeNYSE
Today
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How to Hedge Oil Prices in Volatile Markets
Welcome to the new pricing environment.
We're already started to see kneejerk reactions to short-term indicators last Friday.
A better than expected jobs report sent crude oil prices higher immediately. The figure was encouraging but not a barnburner. Of course, some massive upward revisions for the previous two months hardly hurt either.
Some of this is the result of investors still gun shy after a massive recession. Now we have certainly had a very nice bull market run and the prospects of another meltdown any time soon are negligible.
Nonetheless, the new drivers of oil prices provide little chance for real dynamics to work themselves out. This is all about reaction. Picture it as the newest investor version of smoke and mirrors.
Today's prospects are very good for the oil sector. Natural gas has pulled back from some heavy gains. Major losses earlier this week were erased on Friday. There is a range forming, and it is likely to remain absent any unexpected developments (largely geopolitical at this point).
Demand will increase as we move into the summer; global levels will rise quicker than domestic in the U.S. or Western Europe. That will provide some upward pressure on oil prices.
Remember as well that, while certain region such as the U.S. have a new largess in unconventional (tight or shale) oil, the full volume of that new production will be more expensive to bring on line. That means the additional extraction will not decrease the overall price.
However, the real question is how to make money if trading is in a narrow range for the near term.
You need to develop a new hedging strategy. Here's how...
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Goldman Sachs Is Manipulating Gold Prices Right Before Your Eyes
If you want a lesson on how to manipulate gold prices, you need only look at what Goldman Sachs Group Inc. (NYSE: GS) has been doing over the past few months.
Goldman set the table by predicting a turn in gold prices back in December 2012, which no doubt contributed to the precious metal's 5% decline in the first two months of the year.
At the end of February, Goldman issued a research report that said the big Wall Street bank had soured on the yellow metal, and dropped its three-month target for gold prices from $1,825 an ounce to $1,615, its six-month forecast from $1,805 to $1,600, and its one-year outlook from $1,800 to $1,550.
Then, just yesterday (Wednesday), Goldman doubled down on its negative outlook for gold prices.
The bank's new targets for gold prices are $1,530 in three months, $1,490 in six months and $1,390 in one year.
The double whammy - two downgrades in two months - had its intended effect, as gold prices fell 2%, to $1,558.80, after Goldman released its report. It was the biggest single-day percentage drop for gold in nearly six months.
"If you've ever suspected gold prices are being manipulated, you're not alone - and you're right, they are," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.
The proof is right in front of us.
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Why Oil Prices Aren't Coming Down Despite Big U.S. Oil Boom
The dual promise of the U.S. shale oil boom was that it would reduce our dependence on foreign oil and lower oil prices that would benefit U.S. consumers via cheaper gasoline.
But while U.S. oil production continues to rise, and gasoline consumption continues to fall, gas prices have remained stubbornly high: The national average was about $3.65 last week.
And that trend is expected to continue, with the United States surging past Saudi Arabia as the world's largest producer of crude oil as soon as 2020. Meanwhile, U.S. gasoline demand is at its lowest in more than a decade - down to 8.7 million barrels a day.
Facts like that have led some pundits to predict falling oil prices. Last year, some politicians were promising that stepped-up U.S. oil production could lower gasoline prices to $2.50 a gallon.
Frustrated U.S. drivers struggling to cope with high gas prices were eager to believe such promises, no matter how unlikely.
Unfortunately, all that new U.S. oil, while helpful in some ways, will not have much effect on gas prices - either now or in the foreseeable future.
"The problem is that prices are not just reflective of new supplies, either too much or too little," explained Money Morning Global Energy Strategist Dr. Kent Moors. "By focusing only on how much is there, these analysts provide a fundamentally distorted view of the oil market."
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Why the "Death of Peak Oil" Still Won't Mean Cheap Oil
Today (Wednesday) an analyst from Citigroup became the latest lemming to declare the death of peak oil.
In a report entitled "The End is Nigh," Seth Kleinman says a combination of flattening demand and rising supply will cause oil prices to slide slightly by the end of the decade to $80-$90 a barrel.
But while oil companies have made many large new discoveries over the past few years, including big shale oil finds in North America and Australia as well as deepwater finds in the Gulf of Mexico, that doesn't mean oil prices will fall.
In fact, according to Money Morning Global Energy Strategist Dr. Kent Moors, it's far more likely that oil prices will continue to rise over the next decade.
Moors points out what most other analysts seem to be missing - that all of the new oil finds present many challenges that will add to the cost of extraction.
"None of this new volume is light, sweet crude," Moors said. "The average wellhead costs continue to go up, and that moves its way downstream to processing, wholesale, and retail."
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Forget the Kneejerk Reactions, Oil Prices Are Going Higher
With all of the concern exhibited over Cyprus' problems with banks and China's high-profile billion-dollar solar implosion, the doomsayers are once again predicting an oil price crash.
These guys must really need your money!
Each new geopolitical event is cast as the end of the world as we know it.
The fact is there is nothing on the horizon that will collapse oil prices for one very simple reason.
The prospects for oil prices are increasing, and elevating oil products along with them. Most sections of the U.S. will be testing 2008 gasoline price highs at the pump well before mid-summer.
Yes, we did see a swing down in crude futures during the initial stages of the Cypriot crisis, augmented by some short-lived negative comments on Chinese industrial prospects.
But by last Friday morning, stabilization had occurred and an oversold crude oil futures market began to move back up.
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Oil Companies Hope for New Opportunity in Energy-Rich Venezuela
One of the biggest headlines recently related to oil companies was news of the passing of Venezuelan President Hugo Chavez.
"El Commandante" as he was affectionately referred to by his countrymen, at least by those who approved of his leftist policies, was 58 and succumbed to a lengthy battle with cancer.
Predictably, news of Chavez's passing has sparked ample speculation about what the future holds for Venezuela's oil industry and those oil companies looking to profit from a possible renaissance there.
Venezuela is South America's largest oil producer and an OPEC member. In what may come as a surprise to some investors, Venezuela could be called the Saudi Arabia of OPEC.
In other words, the South American nation is home to about 300 billion barrels of proven oil reserves, compared to about 270 billion barrels in Saudi Arabia. That is according to OPEC's own estimate.
Not only that, but Venezuela is home to the largest natural gas reserves in the Western Hemisphere.
Given those superlatives, it is easy to understand why some Western oil companies are cautiously optimistic about what the future may hold for them in Venezuela.
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Why Bigger Isn't Always Better in the Oil Business
Forty years ago, British economist E. F. Schumacher wrote that "Small is Beautiful" in a famous book by the same name.
The vision champions market approaches that discount the importance of size to results, a philosophy that contrasted the notion that "Bigger is Better."
In bringing the idea of his teacher (Leopold Kohr) to a broader canvass and a wider audience, Schumacher began a debate that has revolved around the impact of technology and market size ever since.
Just last weekend, the debate renewed.
Again it was an English environment, but the subject matter would have been quite unexpected only a few years ago. This time the occasion was our annual energy consultations at Windsor Castle outside London. The debate focused on both size and profitability of oil companies in the development of new fields.
The key lesson: During expanding times in the oil business, like today, small is not only beautiful.
It is also profitable.
And it can be for you as well if you take the time to learn why...
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What's Keeping Oil Prices Down – for Now, at Least
Sequestration, production concerns in China and the political mess in Italy have combined to keep oil prices down, says Money Morning Global Energy Strategist Dr. Kent Moors.
Speaking on CNBC, Moors said the oil market is now "slightly oversold."
Moors said increased demand and less refinery capacity being used could increase the oil crack spread in the United States, leading to higher energy prices even if oil prices fall.
Asked why energy prices are so high, Moors said there are six or seven major factors.
"The bottom line," he said, "is we have to stop looking at Western Europe and North America when we talk about oil demand because oil demand is being driven essentially worldwide by completely different regions."
Among them, Moors said, is West Africa, where oil demand is spiking.
Watch the accompanying video to hear Moors talk more about global oil prices and how they will affect you.
