Is OIL SERIOUSLY undervalued right now??

Discussion in 'Commodity Futures' started by orbit23, Oct 31, 2019.

  1. orbit23


    I'm eyeing a potentially big trade to be made in oil. The risk to reward ratio is favorable and the odds of trade panning out... certainly plausible.

    The trade is based SOLELY on the chart, but i can find a lot of narratives to go with it.

    If the economy is going strong, the oil usually follows. And considering we are in a historical bull market(everyone calling for recession, every second thread on forums/twitter and social media sites alike - calling for a top on the market, record put volumes, retail shorting.... yet the market still going up. It's a bull market, boomer.). All that included, oil seems undervalued, if it is to move in the direction of the economy.

    ARAMCO is said to be going public, and if they did, they would have to publish the amount of oil reserves(which are allegedly "indefinite"). And if the supply was known to be as huge, the price would tank - and this is the fear that is potentially keeping the price low right now.
    There was also a lot of "FUD" - about bombings on these oil facilities. All of this is keeping the price surpressed.
    It's extremely cheap for eastern countries to pump oil, but in countries like US, some of the oil is produced with fracking - which costs around 60$ a barrel(currently - not profitable).

    If the economy is strong, it only makes sense they will pump the price of the oil and it will be profitable for fracking too. US is also imposing sanctions on chinese oil exporters, and thus due to the shortage of the tankers, the shipping prices are at records highs.

    My knowledge on the topic is insufficient. A lot of what i said could be inaccurate. But broadly speaking, i think i am roughly somewhat somewhere correct?

    I'm targeting 90$ on USOIL(WTI crude oil). Timeframe is something that i will not even bother predicting, because it's impossible to get it right. But i'm expecting little to zero downside, or else - i am probably wrong. It has to go soon.

    So i'm looking for oppinions. What are your thoughts? Are you bearish on oil? Are you bullish? I'd like to hear the views from both sides!
    Fx-Game likes this.
  2. maxinger


    It might get even more under valued.

    but then few decades later, price might exceed $90
    because humans have already used more than half of the oil that is underground/undersea.

    Few centuries later, there will be none left and oil price will be zero.
    murray t turtle likes this.
  3. orbit23


    I agree. It very well might. Over/under valued is a very bad term in trading, i agree. There is no such thing.

    But what i'm trying to imply is, that we are at a potential bottom before a big move up.

    It's what i'm seeing, not thinking. I'm expecting very little to zero downside from here, if my thesis is to be correct. Otherwise i'm probably wrong. The downside is limited, but the potential upside is very nice. Makes the trade worth it for me.

    Also it's pretty much at a make or break moment for me. Either it bottoms out right now, or i step back and wait. I'd buy 53.8$ heavily and get out quickly if wrong.
    Last edited: Oct 31, 2019
  4. Fx-Game


    2000-2010 everyone said there is not enough oil for the next 20 years.
    Then scientists explored new oil fields... and today we are being told oil is there for the next 30-40 years.
    So, on what side are you?!
    Maybe this is a reason for the usual drawdown of oil prices, that does not happen for the first time.
  5. S2007S


    Oil now represents less than 5% of the s$p, used to represent more than 20% in the 1970s, I believe energy and oil related stocks are so hated and have so underperformed the rest of the sectors that if there is a sector rotation this could be the group to buy if you have patience
    murray t turtle and GregorySG9 like this.
  6. bone

    bone ET Sponsor

    What’s keeping the price of oil low has nothing to do with Saudi Aramco quite frankly. That was abundantly evident after the Iran drone strikes and refinery fires. North America, by a comfortable margin, is the World’s largest hydrocarbons producer. The world is literally floating in crude oil courtesy of the United States and Canada. And the US isn’t even bothering with huge finds in Alaska and the Gulf at present because of the Permian Basin. The Supply side of the commodity pricing equation has been inextricably altered. Ask the House of Saud how it went for them the last time they tried to price the US frackers out of the market.

  7. Overnight


    If CL can dip below $50 for whatever reason, (and ideally get near Jan lows), that would be a very comfortable place to swing long.
    VPhantom likes this.
  8. bone

    bone ET Sponsor

    What do you think would happen to the price of Gold if the US and Canada came out and announced that they had proven new reserves of Gold Ore that displaced the reserves of the top three current Countries (Australia, South Africa, and Russia) ?

  9. orbit23


    I hope so that would not happen. I'm getting a margin call on my house if we dip below 53$ even. I just went all in at 53.8$, i think it's a once in a lifetime opportunity.

    Jokes on the margin call. But i do think this is an unique opportunity! Very well defined risk, and enormous upside! Even if wrong, it's a trade i would take any day!
    VPhantom likes this.
  10. Overnight


    And people call me crazy for going long on NQ without a stop in a bull market.

    Mr. orbit, for your sake, I hope you are right.
    #10     Oct 31, 2019