Buying Oil Again $$

So, took the plung again today.

With OPEC cutting production (yeah, I know, they cheat on the cuts, but there will be cuts) and more importantly, US projects are  being put on hold.  Crude oil under $40 just is not right based on the fundamentals.

Here are some recent thoughts on it from early December.

Not long after that, 60 minutes did this piece on Oil

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Here is the thing. Watch this 2005 CNBC oil special. Note the Saudi’s are today saying what they said then, yet supply, has not significantly increased since then.

Finally a week after I began going down this road again, I read this

Today crude dipped below $40 a barrel and I decided it was time. I did a combination of the PowerShares DB Oil Fund (ETF) (NYSE:DBO) and PowerShares DB Crude Oil Double Long ETN (NYSE:DXO).

From Jan 2007 to April 2008 we rode USO from $47 to $106. I’m expecting similar results this time and by using more efficient ETF’s ought to get better results (neither the DBO, nor DXO existed in Jan. 2007).

The wild card here is the dollar. It is far weaker now than it was in Jan. 2007 and even in April 2008. One also has to consider the Fed and Treasury are running the printing presses flat out for the dollar and that is flooding supply. Further deterioration of the dollar (it is going to happen) will add upward price pressure to oil that has nothing to do with supply /demand.

Disclosure (“none” means no position):Long DBO, DXO, none
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