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Thursday, September 19, 2019

Investment strategies: Investing in crude oil

After what just happened in Saudi Arabia, it was quite easy to foresee a spike in the oil price.
 It was something I was expecting after the troubles with oil ships and the Iranian forces in the Strait of Ormuz this summer, so although I hadn't found the time to write this article recommending to purchase futures of oil, the thing is that the past 9th of August I made a "purchase" to test my theory in a more practical way (with fake money in my trial account opened at Oanda, so I'm not risking any money - and not winning any real money either).
Here you have a screenshot with the summary of the positions I have opened at this training account:





As you can see, the only investment currently in green is the Brent Oil investment. The other ones are positions I keep in Sterling Pounds (Does anybody still use the word "Sterling"?), as I'm betting that there will not be a Brexit, at least not a hard one, and thus Pound will spike eventually, as well as Euro and Dollar will reduce its value. We've just seen that the Fed has just reduced the interest rate and in my opinion the Euro will follow suit soon. But this is subject of another entry in this blog.

When I "bought" the oil futures, the price of the barrel of Brent was $58.8. I estimated that in the medum term it would escalate up to $70. This prediction was fulfilled this week, so if this was a real investment I'd had sold all my positions and got the money earned, about €1500 over an initial investment of 10,000, about a 15%, not bad for some more than a month.
But, as it is a fake money account, I am keeping the position, and have programmed the tool to automatically sell the options if they reach more $70. We will see if the situation happens again until the end of the year, which I doubt, sincerely.
In the mid term, I think oil has already reached its peak and this prices will not repeat any soon, so the possibility to repeat this gains is remote, in my opinion, unless a war breaks in the zone or again the oil supplies are affected by a blockade of the strait of Ormuz or any similar situation.
In summary, in my humble opinion, the moment to invest in oil has just passed, as it was this August when prices were already under $60 with possibility to reach $70, which has already happened and thus it is time to wait and see.

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