Oil: Black Gold, Literally?

Posted by Turn Key Oil on September 21, 2011 · Leave a Comment

Surely, you have heard oil referred to as black gold a number of times. However, oil is beginning to take on more and more market characteristics of gold. Speculation is taking its effect, and prices are fluctuating. Daniel Dicker explains how oil is beginning to act more and more like gold in the market place.

What’s happening is oil is becoming the new gold — the commodity that trades less and less like a commodity and travels instead mostly in one direction only — up. Although uncertainty and high volatility have been scaring commercial and retail investors away from stocks in the last few weeks, alternatives have been difficult to find: How can you want to buy gold at a nose-bleed inducing $1,800? How compelling are U.S. Treasuries at 2%?

Maybe it does act like a bubble, but a high oil price, whether it is fundamentally or financially driven, equally benefits oil stocks: Exxon(XOM _) and Chevron(CVX _) don’t deliver a discount to its customers even if the benchmark prices for their production hasn’t been fundamentally arrived at. No, they charge today’s going Brent market rate, significantly higher than last year’s rate and guaranteed to generate far above average profits.

High oil prices will lead oil to being the hot commodity. Despite the fact the oil isn’t acting like it usually does, this isn’t necessarily a bad thing. It could create strong investment opportunities if played correctly.

Quotes taken from report by Daniel Dicker, Read the entire article here.

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