Can I purchase oil?

DasBoot · 01:46 PM

I know I can purchase gold certificates via the market without actually taking possession of gold bricks, but...can an individual purchase oil? Figure it might not be a bad idea to buy a few (virtual) barrels now that prices are down. You know it's going up.

I think I understand oil futures, but that locks you into a specific date, no? I'd rather hold my "oil" until I decide it's time to sell.

(And no, I'm not interested in buying stock in oil companies).

M.D. Holloway · 10-17-2008, 01:58 PM

I'll sell you some! You can even put it in your car's engine.

DasBoot · 10-17-2008, 02:03 PM

Nah...I'm talking barrels, tankers. Huge amounts of crude oil.

pwd72s · 10-17-2008, 02:12 PM

Easy...just buy a tanker full...one on it's way. Problem then is the day will come when you must tell 'em where you want it stored.

Filling my heating oil tank is enough oil investing for me...

DasBoot · 10-17-2008, 02:16 PM

So there's no such thing as "oil certificates"?

jyl · jyl's Garage

You could buy USO, the ETF that tracks oil price. If you plot USO against crude oil price, you'll see it tracks very closely.

MRM · 10-17-2008, 06:47 PM

Of course you can buy oil. Futures, options, puts, calls, whatever. Call a broker.

Hugh R · 10-17-2008, 07:42 PM

On gold, I did work for a gold smelter once and he said if you buy gold, take possession. Lots of gold certificates are backed only by a promise. They'll sell 1,000 ounces and only have 200 on hand.

Porsche-O-Phile · Porsche-O-Phile's Garage

They're rare, but there are stories of people trading futures and getting stuck with deliverables. Can you imagine if you had a contract for 10,000 barrels of crude oil? Hell, just the delivery from the port to your property would probably bankrupt you (expensive), not to mention the city and local fire authorities would have their way with you for months. By the time you got done, you'd pay so much in fines, permits, transportation, etc. you'd be lucky to break even at all. Best thing to do is make DAMN sure you trade off to someone who actually is equipped to handle the end product and receive it. Or just avoid futures. Especially in a market like this, it's a very good way to lose your ass.

Hugh R · 10-17-2008, 08:21 PM

bought a future last month at $110/bbl and today it's $69, that would hurt. Buying today for three months from now???

jyl · jyl's Garage

Futures are a bad idea for an individual dabbling in oil speculation. Need special account, settled daily, expires, minimum size, and the pesky physical delivery thing.

USO.

DasBoot · 10-17-2008, 09:11 PM

Yeah, I'm not interested in futures. I'd like to buy/hold a certificate for a period of time that I determine. How much will oil be/barrel in 20 yrs?

competentone · 10-18-2008, 09:32 AM

Quote:

Originally Posted by jyl

You could buy USO, the ETF that tracks oil price. If you plot USO against crude oil price, you'll see it tracks very closely.

+1

Options are available too, so you can "leverage" (if you want speculative risk), or "hedge" if you want to reduce risk of losses in case oil moves the opposite way you were expecting:

http://finance.yahoo.com/q?s=uso

Note with the options: With volatility being so high in the markets right now, option prices are at extreme premiums. It will be expensive to try to hedge.

If you were to go long USO, it might make more sense to write some covered calls to give yourself some immediate return on your position, rather than buying (expensive) puts to hedge against the loss of value in your position.

If the market "goes flat" for a while, the prices on both puts and calls will likely drop significantly. (Which would be good for you if you had written calls, but "bad" for you if you had purchased puts as a hedge against USO dropping.)