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Commodity Trading Trends: Crude Making Its Way Up? (USO, BNO, CVX, XOM, DVN)

February 9th, 2012

Jared Cummans: After peaking above $100/barrel last month, crude oil endured a bit of a slide the mid $90s, but its momentum seems to have shifted. After a big day yesterday, February has seen crude futures begin to make their way back up, much to the delight of many investors. For the trailing weeks, the biggest story surrounding crude oil has been the tensions surrounding Iran. The nation, who controls a narrow body of water through which a large proportion of the world’s oil passes, has been threatening to cut off oil to the U.S. as well as other parts of the world. While WTI is the commodity of focus here in the States, brent oil has also been on a tear as of late [see also Crude Oil Guide: Brent Vs. WTI, What’s The Difference?].

Early today, brent oil touched $116/barrel, holding onto its firm premium over U.S. oil and marking the highest the commodity has hit since August of last year. “The geopolitical events surrounding Iran and the  Middle East and the severe cold weather sweeping across Europe are  providing support for Brent,” said Victor Shum, senior partner at oil  consultancy Purvin & Gertz. “We continue to see more upside risks  for oil, but Europe’s debt crisis will weigh”. For those who are unfamiliar with brent oil, it is still a light sweet crude, but not quite as sweet as WTI. It should also be noted that brent is the most popular form of crude in the world [see also Iran Tensions And Crude Oil: What It Means For Your Portfolio].

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Ways To Play

For investors who have a strong opinion on where crude is headed, or for   traders looking to make a quick return, there are a wealth of options   available. Perhaps the most direct method comes from the March crude oil futures contract offered on the NYMEX for both WTI and Brent. But not everyone is   savvy to futures markets as they can be quite  complex and difficult to understand. Investors can also utilize the United States Oil Fund (NYSEArca:USO), which tracks WTI, or the United States Brent Oil Fund (NYSEArca:BNO) which tracks brent. Finally, for those looking for a more  indirect  play, stocks  like ExxonMobil (NYSE:XOM) or Chevron (NYSE:CVX) also make  for  interesting  opportunities [see also 12 High-Yielding Commodities For 2012]. Related: Devon Energy Corporation (NYSE:DVN)

Written By Jared Cummans From CommodityHQ Disclosure: No positions at time of writing.

CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.


NYSE:BNO, NYSE:USO


 

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