Oil: My pet commodity
Why is oil my personal favourite? When I find it hard to decide on a trade, whether a stock falling fast, or currency pairs/precious metals looking directionless…oil is nearly always a good buy. Or a sell. The general trend of oil is clear – it is downward bias. Price is propped up for political reasons as well as the presence of ‘fear’. Oil fundamentals overlap some of gold and silver. Threat of war and political uncertainty leads to a spike in demand of oil – everyone yearns it for ‘storage’. This makes oil a ‘bouncer’, basically a commodity which seems to bounce on a very strong support point, like a helium filled ball.
Fundamentally, supply is ever decreasing largely due to the presence of electrified transport, advancement in nuclear, and ‘environmentalists’ pushing biofuels. However, refined oil will always be in demand due to application in food and industrial usage. Oil takes many forms, even if these forms have plenty of substitute products.
Employing my very much-loved dollar cost averaging strategy, oil can be bought or sold virtually at…anytime! Of course, we have the yearly trend which lends a trader a medium term outlook, though the trend can reverse at any moment. Stockpiling of crude, or surprise deficits in inventory lends to daily (or at most, weekly) bottoming or spikes in price. However, weekly or monthly trading always rewards patience for this particular commodity.
Take the highest of highs….when oil went above $100 per barrel. Purely political, nothing to do with supply and demand. Whatever excuses the media came up with were thin, at most. The Bush administration had plenty to gain with expensive crude, for obvious reasons.
During our Covid-19 era, take a look at the 10 year graph again. I see a bouncing ball losing energy, do you?