Bold Oil Investors Can Make a Killing

Headlines like the one screaming the oil crash has caused losses to date of about $1.3 trillion, should be ignored by those that weren't affected by the disaster, as it has brought about opportunities rarely seen in one's investing lifetime.

The demand for oil is never going to go away, and the price it is now at won't remain at that low level for a long period of time. Producers will simply cut back until the price starts to rise to a level that is profitable to them. That of course has already happened, and it will take time until the effect of it works its way through the market.

That said, I don't see oil prices getting a huge bounce in the short term, and those taking a position in the sector, will need to have patience while waiting for the profits. Those in it for the long term will make a lot of money if they don't sell too quickly.

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BP (NYSE:BP): Lawsuit Settlements, Judge Panel Says No Way

In New Orleans federal court, BP (NYSE:BP) is facing hundreds of lawsuits. BP was wanting to consolidate all of the lawsuits. A panel of judges said no, this is a victory for the plaintiffs who are seeking billions in damages. There will be no lawsuit settlements.

The judge presiding over these cases is U.S. District Judge Carl Barbier. The cases include wrongful death claims, submitted by the families of the deceased workers who lost their lives caused by the explosion of the Deepwater Horizon rig. Other claims are those submitted by BP investors, Gulf Coast businesses and for environmental damage.

During the decision the panel said, "Without discounting the spills effects on other states, if there is a geographic and physiological 'center of gravity' in this docket, then the Eastern District of Louisiana is closest to it."

Exxon (NYSE:XOM) Company Takeover of BP (NYSE:BP)

There has been much speculation over investors possibly purchasing BP (NYSE:BP), apparently the U.S. Government has opened the door for Exxon Mobil (NYSE:XOM) to "take a look" and purchase BP for a complete company takeover. A merge of the two oil companies would put Exxon's total stock market value at over $400 billion. When asked about the validity of these claims, both companies refused to comment.

Tony Hayward, BP's chief executive, held several meetings last week with several potential "friendly" oil investors. The cause was the possibility of a hostile bid that Hayward said he was fully aware of. BP has stated openly that they plan on selling some of their assets to help cover some of the costs incurred by the massive oil leak.

They have already began talks with several rivals. The U.S.'s largest independent oil group, Apache Corporation, is named as one of the companies being in exclusive talks with BP to purchase $12 billion of investments. Including the biggest oil field in North America, Prudhoe Bay.

A BP spokesman said, " We've said we're going to be divesting about $10 billion over the next 12 months as a result of the spill, but we have no comment on specific deals."

BP (NYSE:BP) Can't Sell Assets Until Government Notified

The U.S. Government has told BP (NYSE:BP) they are to be notified before any asset sales, merger agreements, or significant cash transfers. The letter was received by BP at the end of June from the U.S. Department of Justice. Such a request is considered highly unusual and BP has yet to respond.

It's being said the reasoning for this move by the Justice Department is due to the extremely high cleanup costs, compensation claims, and grants given to Gulf states. Plus, the escrow account that will hold $20 million as agreed on between the President and BP officials.

BP has said they were looking seriously at selling some of their assets as well as attracting new oil investors to help cover the costs. There has been a whirlwind of speculation surrounding the possible takeover bidders and potential investors in BP including, Exxon Mobil, Royal Dutch Shell, China's PetroChina, Kuwaiti Investment Authority, and the government of Qatar.

There is a total of 95,000 claims submitted, half of which have already been paid. BP has already made payments of $147 million to the residents affected by the spill. As of June 1st, The U.S. Department of Justice launched a full civil and criminal investigation into the massive oil spill.

BP (NYSE:BP): We're Not Issuing Any New Shares

Despite the pressure BP (NYSE:BP) is feeling financially, they are saying there will be no more newly issued shares. Although they have been making overtures to several oil investors in different countries where there is good relations. In an attempt to entice them to purchase shares.

Shokri Ghanem, chairman of Libya's national oil company told Dow Jones, "BP is interesting now with the price lower by half and I still have trust in BP, I will recommend it to the Libyan Investment Authority." On Monday, a top Libya oil official said his country should take advantage of the oil company's falling share prices.

BP insists they are not trying to bring in specific investors with new equity. BP shares have lost over half their market value since the Gulf oil spill began in April. Today they saw an increase of 3.5 percent to 333.3p in London.

The Gulf of Mexico holds some of the world's largest sovereign wealth funds. They've previously put capital into into Western banks including Barclays and Citigroup. BP has an extensive history
with the UAE, home to numerous government controlled funds that invest specifically in energy assets.

Warren Buffett Investing Heavily in ConocoPhillips

Regulatory filings show that Warren Buffett has been buying up shares of ConocoPhillips (COP) since the end of March. At that time Berkshire Hathaway (BRK-B) owned 17.5 million shares, while now they've acquired over 83 million shares.

That move by Buffett and Berkshire Hathaway make it the largest shareholder in Conoco at this time.

Other major investment managers have been making large share acquisitions of Conoco as well, including Chris Davis and Ken Feinberg's Davis New York Venture (NYVTX) fund. They believe investment in commodities will be a big part of increasing returns in the years ahead, even though they are temporarily out of favor.

"As developing nations add to worldwide incremental demand for commodities like oil and natural resources, we believe the long-term average price ranges for such resources could climb, notwithstanding the recent pullback in certain commodity prices. Consistent with our energy and natural resource-related investments to date, we will remain on the lookout for disciplined capital allocators who can generate attractive profits for shareholders given a stable price environment and windfall profits under more bullish scenarios."

For a good look at what differentiates ConocoPhillips from its competitors, Morningstar analyst Allen Good gives an indepth analysis of the company.

Oil Prices Will Continue to Fall

There's no question that the trend for oil prices has changed, and for a period of time we'll see that trend continue down.

A major reason I believe this will happen is the nature of trends themselves; it simply takes time for a trend to stop and turn itself around. The reason it takes time is because a trend is simply the response of human beings to a situation, and most human beings are slow to catch on and change.

In other words, people will neglect the underlying fundamentals at times of emotional turbulence and simply follow the crowd. Many times they do it as "bulls" and other times they do it as "bears." We are seeing the bears rear their heads in oil now, and that isn't going to stop in the short term.

While we know over a period of time that demand will start to surge again, as American consumers start to increase their driving again, and emerging market giants like China and India increase their acquisition of oil, and other commodities as well, we also know that they're cutting back on buying now, and that slowdown should continue.

One factor that could slow down this trend is if OPEC slashes production so much that it drives the cost of oil artificially above its market price. That could happen next month when they get together in an unprecedented emergency session to decide on what to do with the oil price drop.

We very well could see oil prices plunge much further before they begin their inevitable climb back up. Much of that will be determined by how long the fear factor reminds in the psyche of consumers, which has caused them to lower their consumption practices.

Economic Fears Spread to Europe as Oil Continues to Tumble

Oil continues its nosedive as demand continues to slacken in response to economic fears spreading in Europe.

Oil consumption in the U.S. fell by 7.1 percent over the last four weeks in contrast to last year during the same time. Use is now at about 19 million barrels a day in the U.S.

Crude had dropped as low as $87.56 a barrel in the afternoon, while settling at $87.80 for November delivery of light sweet crude. That was a fall of $6.07 for the day.

Brent North Sea crude also fell significantly, settling at $83.68 a barrel for November delivery, dropping $6.57 for the session.

The lagging participation of the European economy in the economic downturn is now over, and what has happened in the U.S. is now emerging in Europe. That has also caused the U.S. dollar to strengthen significantly against the euro, while also causing gold to be held back for now as a safe haven.

For oil, the new world of bailouts and economic fears leaves it in a place of probable continued decline in price as demand slows around the globe. India and China demand will slow as well, with China now exporting some gasoline because of slow domestic demand.

As far as the U.S. bailout by the government, it didn't do much to placate investors, as they have started to pour their money into short-term dollar-denominated financial instruments like U.S. Treasuries.

Oil Prices Fluctuate on Demand and Economic Concerns

Uncertainty is the word floating around concerning oil prices, as investors await the decision concerning the government bailout plan, the decreasing demand for oil, and the time it will take to bring platforms and rigs back to production from recent storms.

Other factors in the mix are the cut in production announced by OPEC earlier in September, as well as the continued threat to Nigerian oil procution by regional terrorists.

The potentially serious consequences on the value of the dollar from the ill-advised financial bailout is also on the minds of oil investors going forward.

Fear and uncertainty keep oil and other commodities in an unpredictable mode. We'll see continued fluctuation in prices going forward until things settle down. Early morning trading on the NYMEX had November deliver for sweet crude dropping to $105.57, although they continue to move up and down from positive to negative territory.