My head is spinning with conflicting views regarding the oil markets. The business media is having a field day taking about oil prices. Mr. Oil Expert, has the price oil hit a bottom? Is it time to add oil stocks to your portfolio? YES because rig counts are going down, capital spending budgets have been cut and oil futures are pricing oil at the $60 a barrel for year-end.
The next interview is from another Oil Expert who answers the same questions with NO! Oil production hasn’t dropped yet, oil storage faculties will take another 10 weeks or more to fill up. Oil prices will continue to fall once all the storage faculties are full. The recent rally is based on hedge funds covering their short positions driving oil futures higher. Plus there are rumours that Saudi Arabia is using oil supply to put pressure on Russia to stop supporting the regime in Syria.
The price of oil has fallen back to $49.00 level today due mostly to an increase in oil inventories. The real head scratcher for me is oil rig counts are going down and capital spending on oil drilling has been cut, yet (oil drilling companies) Halliburton & Baker Hughes stock prices are up year to date.
Keep in mind if you plan to trade oil stocks that hedge funds and mutual fund managers tend to buy into a turnaround before it actually happens. I am still bearish and bought some put options on a Canadian oil company in my play money account. I also bought some Southwest Airlines for my investment club.
What do you think? Are you trading these big swings in oil stocks?