Breaking my rule if Oil drops to $15p/b

[Nowler]

I've told some of you about my rule of not depositing more money into my trading account until I make back what I lost.
But...
If West Texas Oil keep falling in price, then I am going to find it impossible to stick to the rule!

It's about $20 a barrel!!
20!! haha
I just jumped in

This has got to be the trade of the year!
I don't know how low it can go, and wouldn't dare try to call the bottom, but even if it drops to $1 per barrel, my account is still solvent.
Though the drawdown would be brutal.

Decisions, decisions, decisions

 

[MasterOfCoin]

I can't say I disagree with you !

No idea how low it will go either, but beyond a certain level that becomes insignificant.

Bargain prices are just that, regardless if they drop more the day after.

Because at some point when old fogies stop dropping dead faster than lemmings off a cliff, the price is gonna rocket back up.

Oh, but when, when, when.

 

[J Livermore]

I've told some of you about my rule of not depositing more money into my trading account until I make back what I lost.
But...
If West Texas Oil keep falling in price, then I am going to find it impossible to stick to the rule!

It's about $20 a barrel!!
20!! haha
I just jumped in

This has got to be the trade of the year!
I don't know how low it can go, and wouldn't dare try to call the bottom, but even if it drops to $1 per barrel, my account is still solvent.
Though the drawdown would be brutal.

Decisions, decisions, decisions

Hi Nowler,

How long do you plan on holding the position?

The longer term you are the better the idea sounds.

Unless of course some governments collapse the way the Soviet Union did.

 

[J Livermore]

Nowler,

I thought about my previous post and I am not as sure about it now.

Is there any way you can take a smaller position in oil and pay all cash instead of using leverage or margin? One idea that comes to mind is an oil ETF. You can invest as small as you want and you won’t have to keep coughing up money every time you get a margin call.

Just a thought.

 

[Nowler]

I can't say I disagree with you !

No idea how low it will go either, but beyond a certain level that becomes insignificant.

Bargain prices are just that, regardless if they drop more the day after.

Because at some point when old fogies stop dropping dead faster than lemmings off a cliff, the price is gonna rocket back up.

Oh, but when, when, when.

Really, it all comes down to the Saudi's and when they are going to suck it up (we know the virus will largely be gone in 10 weeks). The Russian's are in a much better position to ride this game of chicken out, so I dont see them flinching first. I believe there's a meeting between the 2 at some point in April, but I'm quite happy holding this position closer to October/December (to answer your question J Livermore).

I've read some views that it goes to $5 per barrel. I think the smart thing for me to do would be to deposit a little more (it's only a micro account anyway).
Worst case scenario, I still have a shirt on my back and food on the table.

I believe it costs the Saudi's around $5 per barrel to draw it out, where as it costs the Russian's and American's $9/10 p/b.

We've not really felt the recession that was coming regardless of the virus, though once the virus subsides and the demand for oil goes back up, so too will the price. I'll buy more with every $5 drop

Depositing a little more would balance my account better. As it stands, I could withstand the drawdown if it went to $1, but the account stats would luck ugly as fk.

 

[cantagril]

I've told some of you about my rule of not depositing more money into my trading account until I make back what I lost.
But...
If West Texas Oil keep falling in price, then I am going to find it impossible to stick to the rule!

It's about $20 a barrel!!
20!! haha
I just jumped in

This has got to be the trade of the year!
I don't know how low it can go, and wouldn't dare try to call the bottom, but even if it drops to $1 per barrel, my account is still solvent.
Though the drawdown would be brutal.

If West Texas Oil keep falling in price, then I am going to find it impossible to stick to the rule!
It's about $20 a barrel!!
20!! haha
I just jumped in
This has got to be the trade of the year!

EDIT: You beat me to it and have essentially addressed my points. Still, assuming you have time on yr hands....

The deed is done so this is going to me more about managing the trade if nothing else.

I would agree that if an even greater fall in the price is not going to force you out then time may be the determining factor. As demand is continuing to fall as oil consumers shut down (e.g Easyjet) then the immediate problem is the soon to be full storage facilities. Residual demand extended over, say, 3 months may show only gradual signs of increase after that. So, the market being the market and zero not being on the table, what price bracket would seem to be the most likely floor and how are you going to handle that? Or have you just called the bottom?

Of course, there will be a recovery in demand but in the light of the gyrations that the market price has already indulged in historically without a demand-side problem then this could well turn out to change the oil map for the forseeable future.

The case for the protection of national oil industry interests could arguably be not much stronger than it is now and this could be equally well coupled to government stick/carrot programmes aimed at reducing consumption generally whilst furthering other sectors more "beneficial" to the health of the economy through dependence diversification...e.g, battery technology, renewable energy, electrification of basically everything, investment in rail networks, a serious rethink of the current role of the airline industry etc etc

All in all: lower for longer, maybe muuuuuch longer and a sluggish rise in price - hyper-sensitive to storage capacity numbers and the restarting of pumping operations that at some point soon must stop.

So, how long do you want to hold your position? What criteria will use you use to determine whether it's worth holding or not?

 

[Nowler]

I'll come back to this shortly, just want to get a bit of work done so it doesn't look like I was late this morning. (Working from home)

 

[new_trader]

I've told some of you about my rule of not depositing more money into my trading account until I make back what I lost.
But...

This is a dumb rule anyway. Anyone can experience a drawdown period and get to a point where they must deposit money to meet margin requirements to keep a trade open or open a new trade. An inexperienced trader could take years before they make back money they've lost, if ever.

 

[Nowler]

EDIT: You beat me to it and have essentially addressed my points. Still, assuming you have time on yr hands....

The deed is done so this is going to me more about managing the trade if nothing else.

I would agree that if an even greater fall in the price is not going to force you out then time may be the determining factor. As demand is continuing to fall as oil consumers shut down (e.g Easyjet) then the immediate problem is the soon to be full storage facilities. Residual demand extended over, say, 3 months may show only gradual signs of increase after that. So, the market being the market and zero not being on the table, what price bracket would seem to be the most likely floor and how are you going to handle that? Or have you just called the bottom?

Of course, there will be a recovery in demand but in the light of the gyrations that the market price has already indulged in historically without a demand-side problem then this could well turn out to change the oil map for the forseeable future.

The case for the protection of national oil industry interests could arguably be not much stronger than it is now and this could be equally well coupled to government stick/carrot programmes aimed at reducing consumption generally whilst furthering other sectors more "beneficial" to the health of the economy through dependence diversification...e.g, battery technology, renewable energy, electrification of basically everything, investment in rail networks, a serious rethink of the current role of the airline industry etc etc

All in all: lower for longer, maybe muuuuuch longer and a sluggish rise in price - hyper-sensitive to storage capacity numbers and the restarting of pumping operations that at some point soon must stop.

So, how long do you want to hold your position? What criteria will use you use to determine whether it's worth holding or not?

Yeah, price dropping will not force me out of this trade. I am willing to deal with the infinitesimal that it all goes tits-up. It's far more likely that the U.S Gov would step in with it's star spangled cape to save West Texas Oil.

As I said, for every $5 the price goes, the more of it I buy.

It could take a while, I am no expert on oil, but I am willing to wait it out, because it IS going back up. We as humans don't really do smart, or the right things. It would make sense to put more efforts into moving away from oil, but there is currently too much money in it.

I am confidant that the U.S Gov would prop it up if it came down to the crunch. And if that's so likely, then massive efforts to move away from oil and toward more sustainable/renewable energy is unlikely.

Will it go back to $80 per barrel?
I don't really know... probably?? Eventually...

I don't know where my target is exactly, but it's definitely above$40 per barrel. Probably closer to $60.

I'll wait it out because of the likeness and profitability of it.
Of course it could go bust and I lose everything... this is a game of probabilities. But the probability of that is very low. I don't see odds like this very often.

My next steps are to manage the trade. If it drops to $15, I deposit more money, and buy another bit. Ensuring I can withstand a drop to sub $1 p/b.

Part of me is thinking, if I'm going to look to add more to the trade as it moves in my favour, why not add to it now at such prices?

 

[Nowler]

This is a dumb rule anyway. Anyone can experience a drawdown period and get to a point where they must deposit money to meet margin requirements to keep a trade open or open a new trade. An inexperienced trader could take years before they make back money they've lost, if ever.

I've been fighting the urge to break it for the last 6 months now. It was a good rule to start with as it made me stop and assess my plan of action a bit better. But as I have been growing my account, that voice in my head keeps pointing out that I could be gaining more with bigger size.

However, I am still liable to a funky decision from time to time. I have had a 25% and an 16% drawdown in this sub account (I set it up to move away from the initial newbie account - stats were depressing me - too negative)

I will have a serious think about it today, but I reckon i'll temporary disregard the rule in light of this great opportunity. I will probably still wait until I make that last 20% back before making regular deposits however.

We'll see

 

[cantagril]

Yeah, price dropping will not force me out of this trade. I am willing to deal with the infinitesimal that it all goes tits-up. It's far more likely that the U.S Gov would step in with it's star spangled cape to save West Texas Oil.
.........
My next steps are to manage the trade. If it drops to $15, I deposit more money, and buy another bit. Ensuring I can withstand a drop to sub $1 p/b.

Hi Nowler - Just heard on CNBC (18h25 uk time) that physical oil is being traded in North America between $5 and $10 because of a lack of storage.

 

[cantagril]

..........
I am confidant that the U.S Gov would prop it up if it came down to the crunch. And if that's so likely, then massive efforts to move away from oil and toward more sustainable/renewable energy is unlikely.
........

Hmmm, Up to a point, Lord Copper. ..

I do agree that the US gov will try and help where it can but if demand is severely curtailed for X months/years then that help will be more about just trying to use as much US oil against imported as possible. This is not a Trump magic wand act as it would mean some serious reconfiguration (and maybe some new build) of refinery capacity. In the meantime, what support can the government give? If there's no storage then the wells have to be shut off and money thrown at people for them not to work - again, how much for how long?

My comments about renewables etc were for the long term and would be precisely about being able to weather storms such as this. I'm fairly sure that the discussions behind the scenes about the increase in refining capacity of US oil have intensified of late but any effect is also going to be for the long term - to be a little more precise, I'm thinking of 2/3 years from now absolute minimum but could well be 5 or more.

In the meantime, WT might catch a bad cold...as least, it might look like a cold at first...

 

[Nowler]

Hmmm, Up to a point, Lord Copper. ..

I do agree that the US gov will try and help where it can but if demand is severely curtailed for X months/years then that help will be more about just trying to use as much US oil against imported as possible. This is not a Trump magic wand act as it would mean some serious reconfiguration (and maybe some new build) of refinery capacity. In the meantime, what support can the government give? If there's no storage then the wells have to be shut off and money thrown at people for them not to work - again, how much for how long?

My comments about renewables etc were for the long term and would be precisely about being able to weather storms such as this. I'm fairly sure that the discussions behind the scenes about the increase in refining capacity of US oil have intensified of late but any effect is also going to be for the long term - to be a little more precise, I'm thinking of 2/3 years from now absolute minimum but could well be 5 or more.

In the meantime, WT might catch a bad cold...as least, it might look like a cold at first...

I like what you did with that last line 😉

Um, yeah, I suppose that's all possible. I would be looking to hold this trade for 12 months or so. Though I'd have to reassess as we go, obviously.

They certainly should ramp up their efforts to move more to renewables. That would be great for the plant, but old big ships dont turn very quickly 😉

I would very much expect oil to drop more. Globally, we have not reached the peak of the pandemic. Storage are full, and we are totally saturated with cheap oil. Pricing falling is good news for this trade, as I can add to my position for mouthwatering prices.

What's not good for the trade would be for the US to let WTO go under. That would be disastrous to the trade. Though I just dont see that happening.

The US are the biggest producers of oil in the world. Oil is power. To let WTO go under would be to willingly give up power and status. Can you see that happening in the next 1-2 years?

Yes, there is definitely a risk there. But the chances of it happening? ... on a scale of 1-10 where 1 is least likely... it's probably a 2. I could be wrong.... I'm no expert.

 

[Nowler]

This would be hilarious if WT went under 😂
Well... after my heartache subsides...

 

[cantagril]

Hmmm, Up to a point, Lord Copper. ..

I do agree that the US gov will try and help where it can but if demand is severely curtailed for X months/years then that help will be more about just trying to use as much US oil against imported as possible. This is not a Trump magic wand act as it would mean some serious reconfiguration (and maybe some new build) of refinery capacity. In the meantime, what support can the government give? If there's no storage then the wells have to be shut off and money thrown at people for them not to work - again, how much for how long?

My comments about renewables etc were for the long term and would be precisely about being able to weather storms such as this. I'm fairly sure that the discussions behind the scenes about the increase in refining capacity of US oil have intensified of late but any effect is also going to be for the long term - to be a little more precise, I'm thinking of 2/3 years from now absolute minimum but could well be 5 or more.

Meanwhile, Trump has waved his wand a bit and hey presto! ...the problem has gone away...until it comes back.

The scale of the production cuts necessary to compensate for the over-supply is huge. I have little doubt that there will be cuts because there is simply no choice but I reckon this might have a lot more to do with full storage tanks than Putin and MBS realising they love each other. .

If the price can be held around the level where US shale is at breakeven the incentive to increase appropriate refining capacity can't speed things up that much. Take Exxon Mobil's expansion of its Baytown and Beaumont refineries, which was already planned a couple of years ago - together with the pipeline that would bring that lovely WTI to them. With the best will in the world it's going to take another couple of years to get that on stream. So, where's all that lovely stuff going to go?

Whilst the US rejigs their oil policy, the Chinese are cheerfully taking up the slack in the Middle East with both the Iraqis and the Iranians at the same time** but all of that is not going to rapidly sort out the current problem: without turning off the taps in a substantive, coordinated way, supply will exceed demand. The next few months should be as exciting as the stock indices have already been.


**....and they're planning for a production increase over the next few years

 

[ffsear]

Could see some big upside this week. Unless we are being played, there no sense in oil at this price. They need to cut 20m+ barrels a day at least.

 

[Nowler]

Meanwhile, Trump has waved his wand a bit and hey presto! ...the problem has gone away...until it comes back.

The scale of the production cuts necessary to compensate for the over-supply is huge. I have little doubt that there will be cuts because there is simply no choice but I reckon this might have a lot more to do with full storage tanks than Putin and MBS realising they love each other. .

If the price can be held around the level where US shale is at breakeven the incentive to increase appropriate refining capacity can't speed things up that much. Take Exxon Mobil's expansion of its Baytown and Beaumont refineries, which was already planned a couple of years ago - together with the pipeline that would bring that lovely WTI to them. With the best will in the world it's going to take another couple of years to get that on stream. So, where's all that lovely stuff going to go?

Whilst the US rejigs their oil policy, the Chinese are cheerfully taking up the slack in the Middle East with both the Iraqis and the Iranians at the same time** but all of that is not going to rapidly sort out the current problem: without turning off the taps in a substantive, coordinated way, supply will exceed demand. The next few months should be as exciting as the stock indices have already been.


**....and they're planning for a production increase over the next few years

You seem to know more about this than I do.
My grasp on this industry is crude (see what I did there! )

My bet is that at such attractive prices, this is a great money maker of a trade.
But as you have rightly said, how long will it take for this to come to fruition?!
The OPEC+ meeting for Monday has been postponed and there is no real substance to the rally that WTI had Thursday and Friday.

I added to my position and then booked profits Friday evening - I closed 2/3rds of my position.
I expect a decline when it starts trading again, but am happy to keep the long position open as I can weather any decline which falls short of it going belly up.

There's definitely an argument for closing the long position altogether if it's going to decline, but I don't know that for certain, and wouldn't like to miss out on another Trump Pump. FOMO?

 

[Nowler]

Could see some big upside this week. Unless we are being played, there no sense in oil at this price. They need to cut 20m+ barrels a day at least.

Definitely possible given the Trump Pump Thursday and Friday. This is why I wont close my long position out entirely.
I do see a decline to $20 however... possibly more.

The longer WTI stays at such low prices, the more I stand to make.
I am likely going to start deposition to my account on a regular basis now, and will probably keep adding to my WTI position.

I have orders in to buy at $25, 20, 15 and 10

The Saudi's want Canada, the U.S and Mexico all to cut too
I cannot see the politics of this being resolved in the next week... and then you have the problems of storage being full and demand simply not there.

 

[counter_violent]

Everyone busy buying up the cheep oil. Think it through. When the storage is full, where they gonna put it?

 

[Nowler]

Everyone busy buying up the cheep oil. Think it through. When the storage is full, where they gonna put it?

I hear things are much cheaper up your neck of the woods...
You got much room?

I've no idea where they are going to store it all, but I'm excited to see how it all unfolds.

What's your answer to your own question?