Hi,I'm new to the Fool, a beginner in research as well.I'm reading an S&P StockR Report for Global Marine (GLM) dated 03-Jan-98, wherein they project $ 19.00/barrel for crude for 1998, which has been closer to $ 14.00 for much of the year. For you veteran market-miners: How do analysts come to the conclusions they do for these price projections? Is this level of forecasting error common? I'm intend to buy some Global, probably some others in this sector. Oil prices being as volatile as they are (let's see, in the mid-seventies, we saw $ 40.00 oil, then $ 12.00 in the early eighties, with attendent stock price swings), I'm as interested in developing an exit strategy as one for buying. Are there dependable indicators you have used to gauge the direction oil prices are headed?
Fact is: nobody knows.........the market determines the price for crude. Certainly the analysts are the last ones on my list I look for advise.I think the analyst needs to talk towards a certain forecast on the share price and then calculates backwards what crude (price) level supports his chosen share price level. What that analyst says is plain oldfashioned B.S.......crude traders who are 10-20 years day-in-day-out in this market can't tell you with any degree of certainty what the crude price is gonna be 2-3 months forward......why do you think the industry and volume of derivatives ( futures/options/swaps,etc) is such an enormous "market" these days? ........exactly, because no one feels comfortable about the direction and level of future pricing........it's simply impossible to forecast with an acceptable degree of certainty.My common sense and knowledge of this market ( supply + demand of crude) tells me that we are in for a 1-2 year period of very depressed crude prices ( Brent in range $10-15/bl), possibly even a longer period of 2-4 years of oversupplied crude markets. That's my comfort zone for forecasting.......read the analysis of thatreport on what they base $19/bl and see if you are comfortable with their reasoning.........I bet it's based on thin air.
This is what I've come to like about the Motley Fool in the couple months I've been reading, but not participating on the boards; there are some very thoughful people who contribute to the discussions.Okay... what's the Brent, what does it do, and where do I find it?Appreciate other contributors remarks about differentiating between analyzing and forecasting, and trying to figure out what is science vs art, as well.Maybe some hemline or superbowl logic is as good here as anything else. I see by using one of the zillion options on my Schwab research charting page that Global Marine is trending towards being oversold, using their Relative Strength Index feature, and there's little short interest. My inclination is that oil-related stocks are not the same as many other Motley Fool stocks, maybe a buy-em-&-hold-em for 10 years doesn't work so well. I'll go back and look at some of the majors and see what would have happened if I'd bought in 1976-to-date, then 1983-to-date. Robert Sherard (sp) says there is a 2-3% difference in the DJI (maybe S&P?) over 20 years, depending on whether you bought at a peak or valley in the market. Maybe it shakes out the same with oil-related-stocks, we'll see. For now, I think that oil will be in an oversupply state for the next year.Fool On Faithfully...SemperFiFool
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