Oil – Trade Recommendation

Featuring Raoul Pal

In the final part of ‘The Big Story – Oil’, Raoul pieces everything together, considering all the views from our experts and puts together a trade recommendation for his bearish view on the market. Breezing through a collection of charts which back up his thesis, Raoul runs through a variety of ways in which the trade can be expressed. From the genesis of the idea, to the research and investigation, with insight into Raoul’s process, The Big Story concludes with the trade opportunity.

Published on
12 May, 2017
Topic
Psychology, Middle East, Energy Commodities
Duration
15 minutes
Asset class
Currencies, Commodities
Rating
14

Comments

  • DK

    Daniel K.

    18 10 2017 21:01

    0       0

    Demand for oil isn't falling - growth of demand does. Big difference...

  • de

    dale e.

    2 9 2017 20:03

    0       0

    Excellent series on oil. Learned a lot. You wont find stuff like this any where else. Great job. DE

  • EF

    Eric F.

    13 8 2017 10:25

    0       0

    what would be the equivalent options play here? Raoul mentions buying puts, but what of exactly?

  • GG

    Glenn G.

    21 6 2017 17:21

    1       0

    This was an excellent piece and one that could pay off handsomely for those who take action. Oil currently is off 2.5% down to 42.25 WTI. A short play to take a look at would be Cenovus in Canada. They made a very poor debt laden acquisition in March and the stock is down almost 50% since then with the CEO announcing his "retirement" yesterday - 3 month later. It could be a zero.

  • MM

    Mario M.

    11 6 2017 23:46

    1       0

    I enjoyed how he was able to give you several ways to play this thesis.

  • fc

    frank c.

    27 5 2017 18:56

    3       0

    definitely would like to see more of this in other sectors, really great!

  • SR

    Spencer R.

    25 5 2017 19:45

    0       1

    20:30 GMT 25/5/17. Leveraged short WTI using OILD today, based on the macro facts (courtesy of this great video series) vs the expected weak OPEC statement. Already +11.22% up! Planned exit at +36% when WTI drops to $45. Paid for the annual subscription already. Thanks Raoul

  • ct

    constantine t.

    23 5 2017 14:15

    0       0

    It's now 23rd May. This trade seems to have been stopped out, correct? (short at circa 47 with a 2-3-4 point stop...)

  • FL

    Frank L.

    20 5 2017 16:55

    0       0

    Great analysis, worth far more than the subscription price. Best macro view of oil I have ever watched or read. Coupled with the Forestry analysis my many thanks to Real Vision !

  • J

    J. .

    19 5 2017 23:48

    0       0

    ThAnks Rauol. This fortright production makes my subscription so valuable. I own a oil service company operTing in the Permian Basin and i think you are spot on.

  • SB

    Stewart B.

    18 5 2017 19:53

    1       0

    It's hard to challenge your data or thesis.

  • EG

    Eduardo G.

    17 5 2017 12:29

    0       0

    Raul, thanks for the video series! Really enlightening!!

  • AC

    Andrew C.

    17 5 2017 05:10

    3       0

    "The best cure for low prices is low prices" Howard Marks. Empty buildings in Calgary, Aberdeen sees no new assets and virtually no capex. I couldn't get a handle on Raoul's timeframe, but low prices and those anecdotes imply higher prices two or three years down the track.

  • MS

    Mark S.

    16 5 2017 22:05

    0       0

    I spent my career in US E&P and I agree with Raoul. There is just too much oil being sold, and too much in storage. I do believe it will take a while to play out though. Thanks for giving us a peek into you thinking, Raoul!

  • TW

    Tom W.

    16 5 2017 21:17

    1       0

    Raoul, great series, thank you for sharing your process for developing a trade idea!

  • MS

    Matt S.

    16 5 2017 11:36

    1       0

    I would like to know how Venezuela fits into all this - people are literally starving to death there now, when people are that desperate, it wouldn't take much for them to violently overthrow their socialist leaders. According to what I've read, they have the world's largest proven oil reserves, even more than Saudi. Might they not be tempted to offer oil for sale at greatly reduced prices, just to get SOME income of any sort coming in? Anything to not starve to death?

    • MS

      Mark S.

      16 5 2017 21:51

      1       0

      Matt, they can't deliver more than what they are selling now. They have failed to invest in their infrastructure. The oil is in the ground, and will stay there unless someone spends a *lot* of money to get it out.

    • EG

      Eduardo G.

      17 5 2017 12:26

      0       0

      Agreed. If anything they will produce even less (and they've got no inventories to rely on). Don't be surprised if they blow up a few local refineries. Plus, worth looking at what PDVSA is looking to do with CITGO and Rosneft...

  • CA

    Craig A.

    16 5 2017 08:18

    2       0

    Absolutely amazing.

    Please create more of these. Love the format.

  • MD

    Michael D.

    15 5 2017 22:42

    1       0

    Not a pure play, but long USD/MXN seems another way to express this trade (though that pair seems to be trying to put in a head-shoulder lower on weekly chart, so need a tight stop loss at just under 18.5). Would you disagree?

  • JW

    JP W.

    15 5 2017 21:13

    0       0

    Good Series, thanks! Would love to hear a follow up of how you position sized, over what time period, how you stayed/exited the trade in a few months time, doubled up with the rebound etc.

  • JH

    John H.

    15 5 2017 16:31

    1       0

    Thanks Raoul. Don't necessarily agree with your view (think US high-cost storage is the lagging indiciator to market rebalancing, so we'll start seeing draws there last, but doesn't mean they aren't happening now). Thought it was good to recommend people hold off shorting into OPEC. OPEC is trying to bring down inventories so curve goes into backwardation so OPEC sells at higher levels than US shale (opposite is the case with contango curve).

    • EF

      E F.

      15 5 2017 19:12

      1       0

      that's a great point, but if they have to hold back production to bring inventories down to try and turn the curve around, don't they lose out to a falling market share and altogether higher oil price (both of which should help shale)?

  • GA

    Giedrius A.

    15 5 2017 14:16

    0       0

    Thank you Raoul for your analysis and great thought, much appreciated.

  • NI

    Nate I.

    15 5 2017 05:51

    1       0

    Great series Raoul. Your analysis looks good, but my thought is that a naked oil short is dangerous. North Korea is very unstable. My suggestion to the RV community is to limit your risk with a hedge on the short. I could see oil gaping under certain 2 or 3 sigma scenarios that would really ruin your day.

  • RA

    Robert A.

    15 5 2017 00:37

    9       0

    The discussion of trade alternatives from sophisticated to the more simple was an especially important bit in this last segment wrapping everything up and getting to the trade. Our RV audience is indeed varied and while the Pros among us might find the simple implementations pedantic, they are VERY important for some of our less sophisticated subscribers. Additionally, if this excellent segmented format continues there will be trade setups and trade analysis in OTHER areas of the market. Some of us may be on top of our game in FX, Gold, digital currencies and deficient in Bio Med or Tech or.....vice verse. So breaking the trade execution choices down into various levels of sophistication options is REALLY helpful.

  • GP

    Gordon P.

    14 5 2017 21:29

    1       0

    Great education for me, on oil, enjoyed series -- thanks RV

  • DM

    Dan M.

    14 5 2017 20:36

    5       0

    A really great series. My primary disappointment was that it was not a little more balanced with at least some commentary from those with a bullish thesis. Additionally I don't believe you can legitimately say the price of oil should be $20 based on inflation. The cost of production is much higher today to produce the supplies at the margin that come from tight oil, oil sands, and deepwater offshore.

  • JM

    Jim M.

    14 5 2017 20:01

    5       0

    "Listening to people doesn't make you money, doing your homework makes you money".

  • EL

    Edward L.

    14 5 2017 19:31

    3       0

    This was incredibly insightful series. I did not understand what symbols to buy puts in order to short oil. Are we only talking about ETF's.
    Second, while there is no debate about doing homework, the how and the what is in question. For people like me it is a consensus in places like RV that give me confidence to invest in ideas. I frankly do not know how to access charts much less interpret them. Often, I don 't know the questions to ask. This is a significant academic exercise as outlined by experts on RV.

    • DM

      Dan M.

      14 5 2017 20:41

      6       0

      Based on your comments, I respectfully suggest you do not try to trade this or anything else on your own without fully understanding what you are doing and the risk you are taking.

    • EF

      Eric F.

      13 8 2017 10:30

      1       0

      Everyone has to start somewhere, so not the most helpful of advice IMO.

  • Bc

    Beth c.

    14 5 2017 17:09

    1       0

    Ok, very good series, so next ideas are commodities overall which have been falling and Auto's. The auto cycle very much appears to have peaked. HTZ really disappointed. Has to mean falling fleet sales now.

  • Bc

    Beth c.

    14 5 2017 17:07

    0       0

    What is the best ETF to short oil by buying puts? USO ? SCO ? I agree with basic thesis but I think it is a long term play so whatever you do expect it's going to take time to play out.

  • GF

    George F.

    14 5 2017 13:35

    0       0

    U.S. Shale's Favorite Financial Trick Is Getting Less Attractive

    Oil bulls, take heart! U.S. drillers have dramatically reduced their hedging activity, a move that could portend a break in the production gains that have upended global crude prices.

    https://www.bloomberg.com/news/articles/2017-05-12/u-s-shale-s-favorite-financial-trick-is-getting-less-attractive

  • CS

    Clive S.

    14 5 2017 11:44

    0       0

    Thanks!

  • CS

    Clive S.

    14 5 2017 11:44

    1       0

    Really enjoyed this series. Excellent range of research and helpful,advice that's directly useful to the short oil trade I have on at present.

    I look forward to you doing more of these series.

    Many

  • RS

    Rick S.

    14 5 2017 03:06

    2       0

    Thank you for taking us through your process. I enjoyed it and look forward to future series on other opportunities that you see. I liked the 4 part series. It breaks the content into bite sized pieces.

  • JA

    Jason A.

    14 5 2017 01:58

    0       0

    If OPEC meeting is a buy the rumour and sell the news I'm shorting till $36 then reversing and going all in long.

  • GF

    George F.

    13 5 2017 20:57

    2       2

    WTI Oil looks to be back over $47. Has your thesis been invalidated?

    • TS

      Thomas S.

      16 5 2017 11:32

      2       0

      He said he was putting a stop loss at 47. Now it is 49, so he's out.

  • WM

    William M.

    13 5 2017 20:41

    2       0

    Great analysis. For those of us in the business, oil does look to be at the upper end of a sustainable range. A break below $40 just feels like a pointer to the next leg down below $30. The impact on the majors of another prolonged sweep into the $30s will likely cause mergers and buy out this next go around.

  • JV

    Jens V.

    13 5 2017 19:12

    6       0

    Brilliant stuff. Thx Raoul and RV.
    Summary of my thesis for being short:
    1. oil bull market with top in 2008 accelerated the effort to find new sources of crude, to increase efficiency to lower demand/dependency and to diversify to other sources.
    2. Shale oil becomes the new marginal producer. It's based on new technology, not just new oil discoveries, so the impact is permanent and pervasive.
    3. The same goes for efficiency gains. A new Audi A6 today goes twice as far per liter as the 2006 vintage. This won't revert - technological gains are permanent.
    4. OPEC has lost its cartel power as Parrilla explains.
    5. The game theory is now playing out in slow-motion and many market participants still follow the pre-shale, pre-2008-oil-spike mind set.
    6. OPEC, ROPEC and GLOPEC won't go down without a fight, and volatility is guaranteed.
    7. Tesla is not exactly helping. Technology driven change can move faster than we all thought was possible.

  • tW

    tgwtom W.

    13 5 2017 18:40

    9       0

    Thank you Raoul , Grant , and RV, for the generosity of time, effort , and spirit, put forth for the benefit of your #rvfam .

  • JV

    Jason V.

    13 5 2017 11:34

    29       0

    A wonderfully educational series. A deep dive into the case-building process from inception to trade placement by a highly experienced and successful analyst like Raoul is invaluable. A real bonus for subscribers. May this be the first of many in an ongoing series. My hope is that the baton now passes to Grant for a series on 'The Big Story - Gold'. Once again, RV TV has raised the bar. Kudos to the team.

    • DM

      Dan M.

      14 5 2017 20:42

      4       0

      I second that on gold!

  • SS

    Sean S.

    13 5 2017 04:33

    1       0

    Absolutely brilliant.

  • KD

    Ken D.

    13 5 2017 01:16

    2       0

    Wonderful series! Thanks.

  • RT

    Ricardo T.

    13 5 2017 00:28

    3       0

    How to buy puts on oil futures for the long term? Currently, the furthest expiration is Aug 2017, at least on TD Ameritrade.

    • GS

      Gordon S.

      14 5 2017 22:54

      1       0

      Yes, I would like to know too. I was especially surprised to hear about hedging done over 5 to 10 years in the other episodes. How is that done?

  • EH

    Eric H.

    12 5 2017 23:36

    1       0

    Awesome Stuff Raoul. anybody have an opinion on how this will effect the high yield market(HYG or JNK)? Any thoughts would be awesome. HYG on the longer dated chart looks like a rising wedge is forming.

  • DF

    Dan F.

    12 5 2017 21:30

    4       0

    Excellent series. I was already short and following #OOTT, but it's nice to see you putting all these pieces together. I hope this isn't just my confirmation bias talking...

  • SM

    Shaun M.

    12 5 2017 20:31

    0       0

    Five minutes or so from the end Raoul talks about falling oil demand, he may have meant in the US, but the chart was YoY change. It shoed oil demand still growing, just that the growth is slowing globally.

    Would love to hear a vie on further down the road where a supply crunch is surely inevitable.

    • DS

      David S.

      13 5 2017 00:44

      0       0

      Raoul discussed part of the current oil demand in China is being purchased as collateral similar to copper. It would be interesting, but maybe impossible to estimate the oil that is purchased for other purposes than to be used.

  • MB

    Max B.

    12 5 2017 20:09

    1       0

    Fantastic series and format for a look into the O&G Industry. It really has helped to add another layer of information to what I am seeing. I currently work in the O&G Industry in Aberdeen and am extremely bearish as we have very few new assets coming online and virtually no capex spend. In order to take the short side I feel that it will be down to the size of your nuts and managing P&L swings.........Thanks RP

  • FG

    FundamentalAnalysis G.

    12 5 2017 20:08

    11       0

    Excellent summary of the situation in oil and great trading recommendations. Would like to see one in gold, that's always a tough market to analyse.

  • EC

    Eric C.

    12 5 2017 16:51

    1       0

    Love the lessons here. Not just about oil but about investments as a whole. Please make more!

  • rr

    rlw r.

    12 5 2017 16:41

    2       0

    networking process = Outstanding

    Comment below concerning duration has validity, think 2 tranches - a trade and a position

    A couple wise old guys at Berkshire are now long airlines, after despisi

  • JM

    James M.

    12 5 2017 16:16

    11       0

    This collective of presentations is a fantastic format, and allows the novices like my self to put together trades for any thesis or market. The break down of the formation of ideas and investigation into formulating trade ideas from that investigation is exactly the type of tuition I have been seeking for some time. Putting it all together with a trade at the end is icing on the cake. Seems like a long time ago I joined RVTV, 18 months has flown by. I was very sceptical at first as I am with any subscription based site. I can now say that I wish I had joined form the start it really is the best resource I have come across. Thank you!

  • MC

    Matt C.

    12 5 2017 14:43

    15       0

    This presentation was incredible. As a young, self-taught macro student, getting a look into Raoul's process was an absolutely priceless education. Thank you! Really hoping to see more like this on RV in the future. Keep up the great work.

  • RI

    R I.

    12 5 2017 13:47

    12       2

    This was a great series on the overall trade idea generation process. However, could we get some clarification on your time horizon? Reason being, and lest we forget, the commodity super-cycle is over as the outsized Chinese demand seen in the early 2000s is that of a bygone era. Consequently, I'm afraid that discretionary oil trading during this current period of dead-money may be a futile exercise. So although the default outlook for oil is indeed bearish, it will be difficult to trade with a high degree of confidence unless one's outlook is a minimum of 3-5 years. To be clear, the Nash Equilibrium for the oil supply-demand dynamic points to a price below the 5-year moving average, but we may have to endure an onerous timeframe for it to play out.

    • MS

      Matt S.

      16 5 2017 10:49

      0       0

      What about the One Belt One Road project? This would be enormously bullish for commodities wouldn't it?

  • AB

    Alain B.

    12 5 2017 13:21

    7       0

    Another Master Class, thank you Raoul.

  • CD

    Chris D.

    12 5 2017 10:45

    0       0

    Great!