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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?
