Enjoy Cheap Oil While it lasts - 11/19/08

It is hard to believe oil was at $147 a barrel just a few months ago and at the writing of this article it is only $54 a barrel.  Sure I agree, oil had risen too far and fast in a very short period of time and it had to correct.  The U.S. could not hold up to $4 gas and something had to snap.

Energy guru Richard Rainwater recently repurchased shares of Exxon, ConocoPhillips, Pioneer Natural Resources, BP and Statoil.  Yes, he repurchased these stocks because he had sold them in May of this year when oil was $129 a barrel.

Richard Rainwater said I always get out too early and probably missed the top.  It was a smart move locking in his gains in oil stocks and futures.

He told Time magazine in June, “I just felt that America was not ready for $4 gas and we would see a pause here. 

He was smart and cashed in before the all time peak in oil prices in July.  Now, he must know something as most millionaires’ do, so he is taking his millions and putting them back into these big oil companies expecting oil to increase in the relatively near future.

Rainwater sees the increase in worldwide demand; this will push oil prices up in the long term.  Others like T. Boone Pickens and OPEC President Chakib Khelil, believe oil cannot stay this low for long.

Oil increased by 123% in only 12 months to its all time high, but it has been going down ever since along with all the other energy and commodity markets. 

Rainwater has a good track record for investing.  When oil was below $20 a barrel he invested $100 million in oil stocks and $200 million in oil futures making him even wealthier.  It is not a bad idea to pay attention to the big players like Rainwater because they usually come out on top in a big way.

He is again convinced oil will go higher from here long term.  He sold his oil investments last May just because oil had risen too far too fast.

Pickens warned CNBC in an interview that “The Saudis claim they have more oil, but they don’t … They can’t give anymore oil …they’re stacking up the money as fast as they can stock it up.” 

Many experts and organization still predict $200 oil in the next few years.  Pickens said it is just a case of an oil hungry world overwhelming producers.  85 million barrels of oil is the maximum the world can currently produce, but the demand is 87 million. 

We recently saw the largest drop in oil prices in 17 years.  OPEC is cutting production for 2008 and 2009.  How long will prices stay around the $60 level or even the $100 level?

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