Crude Oil is a commodity that has been bullish in the last year or so. The prices of Crude have been on a steady rise over the past two years. Investors have been jumping on the bandwagon buying up Crude because the price has consistently delivered profit for its investors. In fact, many have even doubled their money already.
But what does this bearish sentiment mean for investors? Well, with the recent news of the Iraq war, things have gotten ugly for the global economy. The oil market has been affected by the tension that is building up between oil-producing nations like Iraq and Iran and those that are taking part in the war. The tensions have caused a drop in crude oil inventories in the Middle East and North America. This effect is expected to extend all across the globe affecting commodity markets.
The question many traders are asking is how does this affect crude oil investors? Well, for one thing, investors who have been buying up oil are losing their money. As mentioned above, the Iraq war has resulted in a drop in the price of oil. This means that traders who bought up the oil now have to pay more to get it back up. These high prices will force more traders to sell their stocks and send them into a bear market.
It’s not just investors that are worried about this effect though. Many consumers are watching their budgets and see the price of oil as a major cause. The price of gas and electricity is also a major worry among Americans. When oil prices go up, it means that Americans have to spend more money to fuel their vehicles. This will put a strain on the economies of the states that rely on high fuel prices to fund their state expenditures.
Another thing to keep in mind is that the bearish sentiment could impact the international markets as well. Right now, there are worries about the slowing economy in China and the rest of the world. When oil prices go up, so too does the cost of oil for these countries. That means that the price of oil will likely rise in order to cover the expenses of fueling the Chinese economy. Many investors are worried that this might lead to a recession in the United States and worldwide.
What is really scary is the fact that the bearish sentiment has had such an impact on the foreign markets. Many of the major currencies are still relatively strong. They are doing so because they haven’t suffered as much as the United States or Europe have. However, if that attitude changes, then all of the sudden the currencies could fall significantly. This would have a devastating effect on the markets because it would cause panic buying and selling in virtually every market in the world. This would send shock waves throughout the financial markets and cause them to crash.
Right now, the economic stimulus package being passed by Congress may be able to help the oil companies weather the storm. However, that doesn’t mean that the markets will calm down as soon as the bearish sentiment subsides. The market should remain stable until the federal stimulus package ends, which shouldn’t be too difficult if oil prices remain low.
Right now, the bearish sentiment is hurting the overall economy, but it shouldn’t affect crude oil prices. In fact, the economy should get even better with lower unemployment rates, more consumer confidence, and stronger lending standards. Right now, the market is looking more like the housing market than it does the stock market. Crude oil prices should remain low and should not impact the economy in any significant way.