Friday October 10, 2008

NYMEX crude oil drops below $80 as financial market meltdown continues

bloomberg.com :

The price of NYMEX crude oil dropped below $80 per barrel on concern the deepening financial crisis will push the global economy into a recession, cutting demand for raw materials, while plunging share prices in Asia and Europe left the MSCI World equity index headed for its worst week since 1970. Crude oil for Nov 2008 delivery fell to $78.61 on NYMEX. Crude oil futures have dropped 46% percent from a record $147.27 on July 11.

The US, which consumes 24% of the world's oil, is now likely in a recession. OPEC, which supplies 40% of the world's oil, signaled yesterday [9 Oct 2008] it may cut output at an emergency meeting on Nov. 18. OPEC resolved at its most recent meeting in Vienna last month to stick more closely to official quotas, implying a cut of about 500,000 barrels a day.

- We're still looking out for a bottom here, and after crashing through 8 consecutive $10 support intervals, crude oil looks way oversold at this point. Unless, of course there really is going to be a collapse in which case all bets are off.

I was joking on the forums that at this rate, with prices falling $5 per day, in about 16 days crude oil will be totally free. How about that? :) But long before that, the world economy would have collapsed first. Or, what is more likely, OPEC will be activated to actually do their job, once again. Its mission being to protect the interests of their members by controlling production in order to maintain a floor under prices.

My third-most favourite energy trust is yielding over 40% and has a market cap of $1.4 billion on a net asset value of over $2 billion. Since the asset valuation tends to be rather conservative, that means you can buy a bunch of oil fields at better than half price. And receive monthly dividends while you wait for the price to recover. And I've done just that. I bought some more.

See also :

1. NYMEX crude oil drops below $92 as financial market meltdown intensifies
2. NYMEX crude oil price falls below $90 as credit crisis deepens in Europe
3. NYMEX crude oil rebounds off $87.56 low as governments respond to credit crisis

(2008-10-10 23:25:23 SGT) [Energy] Permalink Comments [1]

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