Monday, April 02, 2007  

Oil prices up? No worries!

First and foremost, I want to set something straight before I delve into the topic at hand: I am in no way advocating that the seizure of British sailors is by any means a 'good' thing that has happened and that anybody should be looking to intentionally profit off of it in any way whatsoever. It is a deplorable act that has been committed by Iran in my opinion, and the British sailors should be released immediately.

With that said, what I want to focus on is the series of events in world markets that this crisis has triggered, AND, how the rise in crude prices could potentially affect the individual investor.

What seems to be the standard scenario that happens when geopolitical events, instability, or acts of nature arise, is a somewhat significant rise in crude prices. Case in point: Look at where crude has gone in the last week or so since this crisis began; at roughly the end of last week, since March 20th, oil has climbed roughly 10% (despite a slight decline on Friday's session in the US).

Now I am getting in to more generalized territory, and theory here, that does not specifically focus on the events that are taking place currently. The fact that we have seen such a significant spike in oil prices since the crisis began, and when other significant world events unfold, is the real focus of this blog.

When oil prices go up, oil companies stocks seem to follow suit, and for the most part seem to move in sync with crude prices. This holds particularly true for US oil companies.

So when oil prices climb higher, unfortunately sometimes to disturbing events such as the hostage crisis, I always find it particularly interesting to keep an eye on any stock related to oil (services, refining, etc.).

For instance, in the United States, major oil companies such as Chevron, Conoco Phillips, and BP all saw significant percentage advances last month for their stocks, with many seeing a sharper rise towards the end of the month due to the unfortunate circumstances surrounding the British sailors.

In general, when oil climbs higher, while you may be feeling the pain at the pump from higher crude prices, there's always an upside to everything in life I say, and there could be potentially in oil and oil services stocks.

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