10/1/11

Time to buy oil futures. Again

Ten days ago the price of oil was very low relative to its expected level in September. We concluded that it was a good time to buy oil futures because the price had to bounce back to $84. It did happen several days later and we proposed to sell at $84. Now it is a good time again to buy oil futures since the current price is below the expected equilibrium level for October, which is between $80 and  $82. The expected return at a two-week horizon is about 3%.

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