Picking up Nickels

Friday, January 16, 2009

I guess I'm bullish on oil

The recent correction in oil prices convinced me to buy The United States Oil Fund ETF (USO) yesterday. To put it simply: although the world is experiencing some severe economic issues at the moment, I think that the long term worldwide demand for oil is strong, and that the eventual increase in demand will outstrip the available supply (thereby leading to much higher prices).

(chart courtesy of CNNMoney.com)

I was watching closely when decreasing demand and growing reserves drove oil prices below $35 per barrel yesterday, which was a sizable fallback from the near $50 price apparently fueled by the most recent Gaza conflict late last month. While I did buy USO with the intention of holding onto it for a while, I could be tempted to sell if we see another 40% price spike between the $27.73 low on 12/26/08 and the $38.75 high on 1/6/09. I guess that makes me technically "kinda long" on oil. :)

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