Trading In Jan 2009: Oil

Trading in shares and commodities has seen the average investor lose 50% of their money in 2008!

Ouch. Think before you click.

That is really painful. Sadly, I lost money too, although having got some better strategies together toward the end of the year manage to come way back up from the October low.

One of the things that turned it around was Imperial Energy. A Russian oil company that was long a target for India’s OGNC. The share price was up and down, even a month before the deal closed at the year end the shares were 50% below the final offer price, which had actually been agreed in the Summer. The Indians tried to get out of the deal.

So for this year, I am looking far more at some macro level political economics (my master’s degree finally comes in useful) for direction. Particularly for resources, which have been shot to pieces this past year. I can’t see at all where oil is going, but unless the dollar collapses it will likely bounce around in a 50% range from where it is today.

In the long-term though, we all know the price of oil is going back up. Which is why owning the stuff still in the ground makes sense. If you are China and India or other cash rich, resource poor states, now is a huge opportunity to build a strategic stake fro a fraction of what it would have cost just 6 months ago.

As well as Oil, Gas too is a big player; as ND has been showing re Russia. Owning Gas assets is about to be a big deal and some UK firms are quite well placed. Indeed for oil and Gas the FTSE and AIM markets have a huge variety of options. Many are pure gambling bets at the moment as the small companies are as likely to run out of money and go bust as get bought by Sinopec et al.

Overall though, with valuations ruined by the current deleverage oil companies are very vulnerable. In any sector that is vulnerable there is consolidation.

(Except Banks obviously, they just get nationalised and given more money by global taxpayers. Another topic on macro political economy for next week.)

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