Now is the Time to Buy Oil ETFs
by S. Wade Hansen 01/22/09After soaring to absurdly high levels just below $150 per barrel, the price of oil has lost approximately 75% of its value and settled on support at $35 per barrel. The question is how much lower can the price of oil go?
Here's the thing. I don't think the price of oil is going to drop below $35 per barrel for the following reasons:
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* $35 per barrel was resistance for years and years. Once oil broke above $35 per barrel in 2004, the $35 price level became a strong support level.
* As the economy begins to rebound, demand for oil is going to increase -- especially in China.
* The future value of the U.S. dollar is going to be damaged by all of the money the U.S. government is pumping into the markets. As the dollar goes down, the price of oil will go up.
Taking Advantage of the Boom with ETFs
One of the easiest ways you can take advantage of the coming rise in oil prices is through exchange-traded funds (ETFs). Oil-based ETFs increase in value when the price of oil goes up. If you're a little rusty on your ETFs, check out Understanding Exchange Traded Funds (ETFs).
Here are a few ETFs you should look at if you believe the price of oil is going to go up:
* iPath S&P GSCI Crude Oil Total Return ETF (OIL)
* United States Oil Fund LP (USO)
Don't Agree? Think Oil is Going to Drop?
Of course, you may not agree with me. You may believe the price of oil is going to drop even farther. If so, you can still take advantage of oil prices using "short" ETFs.
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