From bloggingstocks.com (http://www.bloggingstocks.com/2010/11/01/oil-rallies-to-83-and-most-investors-cringe/)
Investors whose stock and related plays hinge on the price of commodities would be wise to pay close attention to one, key commodity, oil, which popped up $1.52 Monday to $82.95 per barrel.
Investors should also note the primary factor analysts' cited in oil's rise: word of better-than-expected manufacturing sector growth in October in China.
Further, the above refrain is something U.S. investors should get used to: stronger growth in emerging markets abroad, higher commodity costs here.
True, while a myriad of domestic factors are capable of pushing oil and other key commodity prices higher, emerging markets, with their stronger-growth economies and expanding workforces, have the capacity to boost commodity consumption, and by extension, commodity prices, in a big way.
Market/Economic Analysis: Among other investments, rising oil prices benefit integrated oil companies, and the currencies of countries who are net oil exporters, including Canada, the United Kingdom, and Russia. However, rising oil prices hurt companies that use a lot of oil, including airlines and delivery companies, and hurt the currencies of countries who are net oil importers, the United States being a prime example. Rising oil prices also weigh on GDP growth in these countries and also increase the cost of tanker-transported goods. The price of oil has traded in $70-80 range for the last six months.
The bullish case for oil? Even though oil has had trouble closing above $85 recently, a stronger Chinese industrial sector combined with a second stage of quantitative easing by the U.S. Federal Reserve designed to boost U.S. GDP growth, would likely send oil higher.
The bearish case? If the global economy experiences a third-wave of the financial crisis in Europe, the U.S. or Asia, that would likely weigh on global GDP growth, and crude's price would decline.
Investors should also note the primary factor analysts' cited in oil's rise: word of better-than-expected manufacturing sector growth in October in China.
Further, the above refrain is something U.S. investors should get used to: stronger growth in emerging markets abroad, higher commodity costs here.
True, while a myriad of domestic factors are capable of pushing oil and other key commodity prices higher, emerging markets, with their stronger-growth economies and expanding workforces, have the capacity to boost commodity consumption, and by extension, commodity prices, in a big way.
Market/Economic Analysis: Among other investments, rising oil prices benefit integrated oil companies, and the currencies of countries who are net oil exporters, including Canada, the United Kingdom, and Russia. However, rising oil prices hurt companies that use a lot of oil, including airlines and delivery companies, and hurt the currencies of countries who are net oil importers, the United States being a prime example. Rising oil prices also weigh on GDP growth in these countries and also increase the cost of tanker-transported goods. The price of oil has traded in $70-80 range for the last six months.
The bullish case for oil? Even though oil has had trouble closing above $85 recently, a stronger Chinese industrial sector combined with a second stage of quantitative easing by the U.S. Federal Reserve designed to boost U.S. GDP growth, would likely send oil higher.
The bearish case? If the global economy experiences a third-wave of the financial crisis in Europe, the U.S. or Asia, that would likely weigh on global GDP growth, and crude's price would decline.
Good article. I never thought about the fact that rising oil prices hurt the currencies of net importers such as the US, boosting our commodities play.
ReplyDeleteHowever, do you think it's a good idea to just copy and paste someone's article? I think paraphrasing is a better idea (I was reading this article today and it said... etc).
I think you're right. I should have just posted the link and paraphrased the article. At least I credited the author in my post. In the future I will use the method suggested.
ReplyDeleteOn another note, we would assume the stock price of COP would increase if the price of oil increased 1.83% today. However, COP was down 44 cents (0.74%) and took another hit after-hours. But overall, I think the stock will correlate closely with the price of oil.