3. Crude oil futures quotes : Based on the prices of oil futures contracts, these data generally reflect the direction that traders and speculators believe oil prices will go. You can track these prices by searching “crude oil futures quote” and selecting the first result at www.cmegroup.com. An understanding of the current supply and demand set-up is key to understanding the overall oil markets... and more specifically, the general direction of prices at the time. It is also important to be aware of global events and news . As we showed you in previous chapters, oil prices react quickly to world events. If something jeopardizes the world’s oil supply, it could cause prices to skyrocket. So being “up to date” on the news around the world is essential if you want to be a successful investor in this sector. Another indicator you can watch for with oil prices is capital investment . Management teams tend to pour money into businesses when they believe oil prices are headed higher. And on the flip side, they tend to cut spending and costs when they expect prices will head lower. This measure can be deceiving, though. Oil companies are usually slow to react to falling oil prices. They may continue to spend even as prices decline. So be careful with this analysis. As we said, the real problem is that predicting and timing the rise and fall of oil prices is foolish. It’s fine to “buy the dips” if you can identify the dip in time. But unless you trade oil daily, short-term moves in prices won’t make any difference in your ability to make money and increase your net worth. Our investment strategy in my Commodity Supercycles newsletter is based upon the belief that oil prices will continue to go up and down. But we believe the highs will be higher and the lows will also be higher as we march into the future. It’s a long-term approach. The price won’t shoot straight up from here. This will always be a volatile industry. But the overall trend is UP.
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