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Anyone buying oil at the moment?


grunff

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Bearing in mind that I'm a novice investor, having only been doing it just under a year...

 

Oil seems like a great buy at the moment, am I missing something? Are there any warning signs that I am failing to see? (Laffer aside)

 

If not, the next question is what vehicle to use. I am tempted by ETFS Brent Oil (OILB), because this gets round any uncertainties surrounding individual oil companies. Again, does this seem reasonable?

 

 

TIA

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First of all, OILB is Brent Crude, whereas WTI stands for West Texas Intermediate. The ETF for WTI is OILW.

 

There is no difference between buying OILW and continuously rolling a near-month WTI future contract. (save for any additional management fees that OILW may apply). In both cases, you will encounter a contango at the monthly roll, which currently adds up to about 10% per year. The only difference is that if you roll the future directly, you will incur a loss every time you roll with a contango, whereas with OILW these losses will be incurred by the fund, which resulst in a reduction of entitlement. OILB has lost approximatelty $10 per barrel this way since its inception about 18 months ago.

 

You cannot "buy" oil in any other way. Oil does not work like a financial instrument. It has a cost of storage and this is reflected in the loss you make when continuously rolling a future contract. (in the same way as if you bought a physical amount of oil - you would have to hire a storage space to store the oil)

 

There is no point rolling short term futures (or holiding OILW/OILB) if your intention is to bet on a medium to long term rise in the price of oil. If your focus is on the medium to long term, the best strategy is to buy shares in oil producers with large reserves in the ground. This oil is effectively stored for free, and if the oil price goes up in the long term, then the asset value of the producers with reserves will go up, as the oil in the ground gains value.

 

The only way to get direct exposure to medium term oil prices is long dated futures. You need to be able to stomach any margin calls between now and expiry, should the price of oil fall. See my thread on this: http://www.greenenergyinvestors.com/index.php?showtopic=1073

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  • 2 weeks later...

I've bought a few Canadina Enbergy Trusts via TDW, and have received some dividends.

Worked easy and I've invested relatively small amounts in the following

 

 

Harvest Energy Trust

Trinidad Energy Services Income Trust -

PrimeWest Energy Trust

CCS Income Trust

Fording Canadian Coal

Pengrowth Energy Trust

Penn West Energy Trust

Enerplus Resources Fund

 

most are presetly in positive territory, apart from enerplus

Watch for falling dividends as per another thread.

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What is the best way of buying these Canadian Energy Trusts? I usually use Selftrade, but they don't seem to allow these to be traded - any ideas?

 

Hi, I went through this same idea / research / thought process a few months ago, and dipped my toe in with Enervest Diversified ... http://www.stockhouse.ca/comp_info.asp?sym...&table=list . This isn't a pure oil / gas play, but has a good level of exposure, and a very stable and high dividend.

 

If we get another dip, I may grab some Arc Energy (http://www.stockhouse.ca/comp_info.asp?view=&Displaycurrency=&symbol=AET.UN&table=list) as well, which is a purer play.

 

I bought these with TD Waterhouse - opened an account with them for that specific reason. They do seem hard to get hold of through most brokers.

 

One thing to watch is the currency risk (I've not made much on Enervest despite getting in at 5.86, cos of relative strength of sterling since then) but I'd say this is in your favour if anything, at the moment. Canadian dollar has had a bit of a hammering, perhaps unfairly considering the fundamentals, and could be due a resurgence.

 

BP is the simpler option of course... look for the BP thread.

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