Skip to main content

Bet on Oil above $80

Finally economy is going some signs of life and if there is one price which could reflect (and predict) direction of economy, I would say it is oil price. Now that oil is above $70, it is predicting a recovery in second half of 2009 and early 2010. In Oct 2008, I predicted oil price heading to $80 - while I was off by about 9 months, it is finally reaching that target (after making a trip to $32). While oil has recovered, Natural Gas (NG) is still at bottom and trading below $4. Normally the ratio between oil of price/oil of NG is about 10-12. Currently it is nearly at 18. This is due to following facts:
  • Oil is movable commodity unlike NG. Natural gas can be moved only with pipelines whereas oil can be moved across oceans. 
  • Hence the ratio is widening since China and India are recovering while US (biggest producer and consumer of NG) is still slow in recovery. When there are definite signs of US in recovery and growth, NG would start going up
So here are my predictions (by year end 2009):
  • Oil between $80-90
  • NG above $5-6
So how can we as investors take positions ? I have been studying some MLPs and there are many opportunities (though risky ones). Here are some ideas which combine my usual investing strategies of "survival" and "perpetual call option" :
  • Delta Petroleum (DPTR): Buy price $2.2, Target price in 12 months: $3.5
  • Atlantic Pipeline LP (APL): Buy price $8, Target price in 12 months: $12. This was my recommendation few weeks back at $4 and now it is trading above $9. Wait for it to come down before taking any position. Alternatively you can consider following stock. This is a dividend paying stock
  • Crosstex Energy LP (XTEX): Buy price $4, Target price in 12 months: $6. This is my stock of week recommendation. It is similar to APL and has potential to go up similar to APL in next few weeks when they close on deal to sell assets for above $200 M and reduce their debt load. Being MLP, it is required to distribute majority of its income to unit-holders.
  • Precision Drilling Trust (PDS): Buy price $5, Target price in 12 months: $7. This was one of my past recommendation.
So if you want to bet on world economy recovering, oil/NG are best way to play the recovery.

Good luck and have a good weekend!

/Shyam



Comments

Anonymous said…
My comments is that the blog comment is enabled now.

Thanks.
-Abdeli
6:29 AM
Larry Goldstone said…
You do not allow dissenting opinions even when in the past they have proven to be far more right than wrong...why is this?

ever read any books about trading???
11:57 AM
Post a Comment

Popular posts from this blog

Clicks to Tokens: Will 2026 Echo 1998's Boom or 2000's Bust?

My "blogging" was in hibernation last 8 months due to my self-imposed restraint given the environment as well as built-in inertia to get started despite so many interesting events and markets reaching all time highs after taking a big dump around "Liberation Day" in Apr...Around that time I had the blog ready that it would be repeat of Mar/Apr 2020 panic and recovery during onset of Covid Pandemic. The hunch happened to be correct and I was glad that I could keep and take some positions which I am still holding especially around AI theme. But that was then...as 2025 is about to wrap up in 10+ weeks, let's look at what's in store for rest of 2025 and 2026. And what's better time than to start writing again just before one of the most important week on the calendar with multiple key events coming up next week... Fed meeting to decide the course of interest rates - it's almost guaranteed that Fed will cut rates by 25 basis points (2nd time in 2025) and...
Post a Comment
Read more

2026: The Year of Convergence – Melt-up, Moonshots, or Mid-cycle Correction?

Happy New Year! After another period of self-imposed hibernation from the blog—partly due to the festivals, travel, intertia and partly to watch the dust settle on a chaotic 2025—I decided to use the quiet of this New Year’s morning to finally reboot.  Looking back at my October post,  “Clicks to Tokens,”  the hunch about the AI theme held firm. We spent much of 2025 debating whether we were in 1998 or 2000. As we enter 2026, the answer seems to be "neither and both." We have the roaring optimism of the 1920s fueled by "Silicon Spirits," but with the high-speed volatility of the 2020s. So, as the calendar flips, what is in store for 2026? Markets may experience melt-up (S&P touching 8000),  with some moonshots (like SpaceX and OpenAI) IPOs or even see mid-cycle correction bringing down S&P to 6000. That's a wide range and will be decided by Four R's... Here are my thoughts on the " Four R’s ":  Rates, Robots, Rotations, and Real Assets. 1. ...
Post a Comment
Read more

And the Oscar goes to...

It's Oscar Sunday and time for predictions for few categories - before I digress into talking about drama in DC or markets.  First of all, I want to recognize the damage LA fires have done to the beloved areas of Los Angeles and impacted families across all spectrums. My heart goes out to them and wish them recovery and rebuilding of their lives... This year's Oscar nominees and post nomination period had been interesting to say the least. Due to this, the field is wide open in almost all categories and that's what makes prediction game so interesting. Just to set expectations, I would consider a win if I get even 50% predictions correct given the dynamics of nominees this year. So here are my predictions - "And the Oscar goes to..." Best Picture - Anora (surprise could be "The Brutalist") Best Director - Sean Baker for "Anora" (Surprise could be Brady Corbet for "The Brutalist") Best Actor - Adrien Brody for "The Brutalist"...
Post a Comment
Read more