We have long advocated that there is a case for oil. However we have not generally recommended buying, and been proven correct.
The case for oil is partly there is the continued possibility of a US or Israeli strike on Iran that could send oil skyrocketing.
Partly ther is a long term case for a uptick in the price of oil.
This week we listened to Mr. Ole-Richard Hammer of Pareto Securities, he is the son of Mr. Jarle Hammer who we have known for 25 years – we like the Hammer’s, they know shipping and they know oil.
Mr. Hammer junior makes the case for an eventual turn in the oil price upwards based on both a demand side and a supply side analysis. Especially the supply side he seems more qualified to say something about as compared to many others. He also puts faith in OPEC, based on their track record – an interesting rather contrarian observation.
Mr. Hammer predicts oil at USD 85 average for 2009.
Oil for delivery in the future is now considerably more expensive than oil for immediate delivery.
This is the link to his presentation, in Norwegian – but you will get the points.
http://www.aksjenorge.no/Portals/2/OSLO08_storaksjekvelden_ole_rikard_hammer.pdf
If you are looking for exceptional returns there is a case for hitting the reversal of oil prices in a highly leveraged possition sometime within the next 24 months. Timing it will be extremely difficult.
Leverage can be accomplished through several means.
– Buying pure oil contracts, we do not recommend this.
– Buying western stock, with leverage.
– Buying Russian oil stock outright.
We prefer the later method as this gives leverage on multiple levels.
The correct way to play it will be to split the bet in several tranches each with leverage, allways diverisfy.
Hans Lysglimt
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