$OIL and $NATGAS are in the spotlights recently, with prices continuing to surge. This is great news for smart and patient investors, because back in the years, no matter what kind of crisis we went through - prices of $OIL always come back to normal levels sooner or later. It's the surest thing in the world.
So my strategy here is simple - every new $5 increase in the price, I open a new short position. Opportunities like this only comes once in 5 or 10 years. All you need to have is calm mind and projected liquidity for a really bad scenario, where you have to short even more. $OIL is not $TSLA (Tesla Motors, Inc.), it is something that every one of us uses in most of their daily activities and surge with 800 -1000% in the price is impossible, because the world will stop spinning.
Even as my portfolio results are bleeding, because of all my $OIL trades, I'm truly happy I have these opportunities that the market gives us. I will share with you my thoughts why the price of oil is reaching(if not already reached) it's top and why we should expect to drop at some point.
1. I will start with the pressure that Us, China and India already put on the OPEC group. The top 3 $OIL consumers are struggling with the surging prices that is hurting the recovery and setting the stage for inflation. We've seen before the influence that US has on the Prince and after the latest agreements from the #OPEC's October meeting, it's time for Biden to roar back with ultimatums for the coalition.
2. The second reason comes from US again, and it is regarding the nation $OIL reserves. When the prices hit the record low in the pandemic, US bought cheap oil and loaded to the maximum it's reserves. I expect at some point to see those reserves hitting the US market, cooling the supply and lowering the price for the nation. Also, the reserves of China might be put strongly into action as well.
3. The leverage on Iran is another ace in the pocket for US. After the sanctions Trump put on the nation exports of oil, the market lost more than 2mbd. After Biden step in, he showed willingness to negotiate with Iran and because of the need for better prices and the importance of the nuclear deal - those sanctions soon will be gone and Iran will start flooding the market again.
4. Before the pandemic, the US was the biggest producer of oil in the world, hitting an all-time high production of around 13mbd. To produce and earn money in the US, price should be 45-50$ per barrel. With those surging prices, production now is coming back strong. Disruption from bad weather supported the price popping, but now all is almost fixed and back to normal. If weather stays normal most of the time, those production records will soon be reached again.
5. Last but not least - I will point to your attention the stock market bubble that we are witnessing. With higher inflation, higher rates by the FED, potentially market crackdown - dollar will continue to surge, which will hit the $OIL price as well.
I hope prices can go up to 90 or 100, so I can short more positions, but even on the $80 price, shorting here will be a very good trade after some time.
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