After the ECB’s announcement for a major bond-buying program yesterday, markets and commodities soared. One of the best performing was crude oil, as its fate hinged on whether or not the ECB was willing to help out some of its most indebted nations. As its price continues to climb and strives for $100/barrel yet again, legendary investor Jim Rogers has gone on record to tell you when and why you should buy the commodity [for more crude oil news and analysis subscribe to our free newsletter].
The first thing that Rogers notes is not to buy in just yet, believing that there will be a better opportunity in the coming months as the global economy has been relatively volatile. “If the prices collapse, I would suggest you to buy more. If there is anything that makes it go down, I would suggest buying it because until we find a lot of oil, prices will stay high and go much higher” says Rogers. His main reason for his love for crude is the dwindling reserves of the fossil fuel that he feels will only push prices higher as time goes on. Of course, he probably failed to consider some of the oil that has been found but is currently unreachable, like the largest reserve in the world that sits on U.S. soil.
There are a number of factors that play into the price of oil, as it has had a relatively volatile year. Rogers suggests that investors should keep their finger on the trigger, and be ready to buy in when its price dips. He cites a possible war with Iran or a worsening European debt crisis as potential drivers for crude sinking, leaving you with a golden buying opportunity. Below, we outline several investment options to help you take advantage or Rogers’ advice if and when oil prices do take a hit [see also 25 Ways To Invest In Crude Oil].
- United States Oil Fund (USO): This ETF tracks front-month WTI crude futures, allowing investors to make a direct play on the commodity. Note that USO will fall prey to contango with its front-month strategy, as it was originally designed as more of a trading instrument than a buy-and-hold product.
- Pure Beta Crude Oil ETN (OLEM): This fund aims to alleviate the impact of contango with a unique futures strategy. OLEM is composed of a single WTI contract, but may hold two during its roll period where it chooses from a number of contracts of varying maturities in order to avoid the negative effects of a contagoed environment (which crude oil often exhibits).
- Energy Select Sector SPDR (XLE): This fund will allow you to play the production side of the commodity, as it is home to the biggest oil companies in the world like Exxon Mobil, Chevron, Halliburton, and many more. The fund has more than $7 billion in assets and represents an extremely liquid option for active traders.
Disclosure: No positions at time of writing.