Oil Price Goes Up, Oil Price Goes Down...  

Macquarie Bank have started pitching warrants (options) on the oil price to retail investors - once taxi drivers start talking about trading these I'm going to get worried that a bust is just around the corner.

Crude oil futures plunged on Wednesday after traders sold profitable long positions. The market has given up nearly 6% since Fridays record peak at $67.10, despite positive news flow from the US Department of Energy data last night. Gasoline demand has averaged at 9.5 million barrels a day over the past four weeks which is 1.5% above a year ago levels.

The Organization of Petroleum Exporting Countries (OPEC) also released a report stating the pace of oil demand is expected to rebound next year, supporting long-term bullish arguments. These two statements however could not steam the flow of selling as the futures market gave up $2.94 to close at $63.25 a barrel.

Are you looking for Leverage into the volatile market of Oil?

Macquarie Warrants & Structured Products is offering investors the ability to gain leveraged exposure to the most actively traded commodities market in the World, Oil.

Macquarie Oil Warrants allow investors to trade their view on the future price of oil via warrants linked to a NYMEX futures contract (CLH6 Mar06 Futures Contract)

Benefits of Macquarie Oil Warrants

Easy access to oil futures market
No minimum trading size
No physical delivery required
Warrants priced in Australian Dollars
Liquid provided by Market Making
Listed on the ASX
No Margin Calls

How do Macquarie Oil Warrants work?

Macquarie Oil Warrants provide exposure to movements in the price of oil. In particular, they track the movement in Light, Sweet Crude Oil futures contracts. The price of Macquarie Oil Warrants is calculated on the Oil futures contract and the current Australian/US Dollar foreign exchange rate.

By purchasing call warrants you receive upside or "long" exposure to the price of a oil futures contract which allows you to receive a cash settlement amount in Australian dollars, where the settlement level of the Oil futures contract is greater than the exercise level at maturity.

By purchasing put warrants you receive downside or "short" exposure to the price of a oil futures contract which allows you to receive a cash settlement amount in Australian dollars, where the settlement level of the Oil futures contract is less than the exercise level at maturity.

Traders looking for maximum exposure to short-term movements in the oil price should consider the following warrants for a high-risk, high-return strategy.

Energy Bulletin has a couple of links to other articles in the local press. First financial gossip columnist Michael West in The Australian, and secondly the Sun Herald on the "black art of oil pricing".

Once regarded as the domain of crackpots and scaremongers, Peak Oil Theory is now fashionable.

The era of high oil prices, which now seems upon us, is great news for oil and gas producers but it is dreadful for just about everyone else, especially the likes of transporters and airlines. In the medium term, crude oil is far more likely to rise in price, than fall.

And a few years from now ... well, no less than another 12 uranium explorers have materialised on the ASX in the past 30 trading days.

Out in abstract Libertarian land, Charles Featherstone has issued a "Challenge To Peak Oilers" to put their money where their mouths are. Personally I'm getting kind of tired of this nonsense. My view is (1) no one really knows exactly when the peak of production will be (2) no one really knows what will happen to the economy (3) the long term price of oil futures tends to get fixed to a price approximating that of the present price allowing for the cost of carry by arbitrageurs - so assuming that oil prices are on a one way ride up forever which would be reflected in long dated futures prices is simply ignorant. Yes - assuming the price will go up is probably a good bet in the short term, but thats all you can say.

The post Soviet peak period probably provides a good micro example - the economy collapsed so fast that demand went way under production capacity and the two of them have only recovered now, 15 years later - and Russian production may well be starting back down again.