OIL CONTRACTS

07.2.09

July seems to have arrived early! Here it is! So have some pre-purchase oil contracts from our area suppliers. What is up, or down, as the case might be?

Pre-purchase options have never been out so early. Normal timing has been in August and last year they were "terrible" offers, as we found out later. The programs to date have ranged from $2.59/gallon to $2.79/gallon, excellent compared to last year, but I haven’t a clue whether or not to recommend them. The good part is these early offers are not a whole lot higher than pricing that ended up being the "norm" reached during the final part of this last heating season. This may "suggest" that it could be good to "lock" one of them in.

There certainly is no current or pending oil inventory shortage. OPEC is attempting to curtail oil output to keep prices higher, but unless there is a significant rebound in energy usage - read driving, there is not much to suggest that oil usage is going to spike anytime soon. That leaves pricing to the "traders" and if current activity is any indication, they bid it up or down, based purely on factors other than real usage figures. World stability would be good for keeping prices down.

What to do? I have to leave it to you, at this writing. The $2.59 offer is the best of 3 received so far. All are limited time offers. I don't know if there could ever big a big drop below that for this coming year, but it might be stable at/around this level. Stay away from the "low price" guarantee options however. All my calculations show them to be expensive insurance.

©2009 R. Leech features.