Is Crude at a Crossroads?

Jun 03

Is Crude at a Crossroads?

Oil is a very popular commodity for people to invest in, because it has a great many immediately obvious influencing factors. Right now however, its future looks relatively uncertain, as it appears as though we could see either a bear or a bull market immanently. There are indicators for both sides, which is making some investors wary.

As a commodity, one would have expected oil to decline in value along with the rest of the commodities, which have nearly all experienced some sort of slide this year. It has however, experienced a rise, albeit erratically, with the July Crude Oil contract actually up by 3.4 percent. It’s certainly bucking the trend, with many experts believing this is down to the prediction of future growth around the world. As businesses and economies recover, their demand for oil will surely grow.

Those who favour a bear market however, have observed that there is currently a very high inventory level, which means that large stockpiles are widespread. On the flipside, demand is actually quite low, as many businesses and economies are not yet in growth. This could mean that oil is going to take a sharp drop in the near future, as supply and demand works against it. Remember that high supply and low demand means low prices.

Technical analysis however, suggests that while oil is certainly at a critically important juncture, it could well be about to experience a rise. There have been upside breakouts for both the July Crude Oil contract, and the Select Sector SPDR Energy ETF, which includes big players such as ExxonMobil and Chevron. This suggests that there is a bull market incoming.

These two contradictory views mean that it is very hard to work out where oil is going to go, and it might not be clear immediately. It might be the case that these opposing signals continue for quite some time, though things could change dramatically quite quickly.

If you’re looking to invest in oil, then there is certainly money to be made, but it might not currently be wise to take a long term outlook unless you’re a confident market trader.  Crude oil spread betting is a fast paced way of profiting from movements, and might be a better way of approaching things in the short term. You only need to wager small amounts, and positions are generally closed by the end of the trading day.