About Oil Prices

YoungSexyThang asked:


The way I understood it was that high energy prices were hurting manufacturers, transportation, and consumers directly. Now, as oil prices decline, they say it is bad for the economy.
Please, how is it that low oil prices were good when prices were high and high prices are good when they are low?

Vivian

Gerrardo asked:


I see that prices for oil becoming very cheap. It is so good to have a car now days. So why do they cry about oil if they waste it like this?

Phyllis

ETF Planet asked:


It’s been a wild ride for Oil based ETFs over the last few months, especially for the MacroShares Oil Down ETF (DCR), which rises in price when the price of oil drops. Needless to say, DCR has been severely punished as oil prices have now cleared $130. On April 17th MacroShares issued a press release as follows: “The NYMEX light sweet crude oil futures contract for June closed at $114.36 on Wednesday, April 16th at 2:30. This marked the third consecutive business day that the reference price for MacroShares Oil Up and Down (UCR and DCR respectively) closed at or above $111. This triggered an early termination event for the securities. On July 3rd, a final distribution payment will be made to the UCR and DCR shareholders of record as of June 30th based on the underlying value of the Up and Down MacroShares Trusts. The underlying value of the trusts will be determined based on the June 25th closing price of the NYMEX light sweet crude oil futures contract for August.”

So what does this mean for investors of DCR? Basically Oil needs to drop below $120 for DCR to have any value for the distribution. The value for the shares will be based on the following forumla: ($120 - Crude) / 3 = NAV

So if you’re looking for a more conservative short play on crude oil, and with a longer timeframe than a few weeks, pass on DCR and look to shorting or buying puts on the USO instead.



Bernice