Trouble in Irag has Big Oil securities such as United States Oil (NYSE: USO) and ExxonMobil (NYSE: XOM) surging up to higher price levels. Many previous articles have detailed the appeal of Big Oil stocks such as Chevron (NYSE: CVX) and BP (NYSE: BP). The strife in Iraq has oil securities rising, with United States Oil up for the week (chart below), along with other securities in the sector. If anything, it looks like the rise will continue.
The role of oil as a new safe haven asset is just one of its many appeals to investors.
That is why BP, Chevron, ExxonMobil, and other oil securities rise when there is tension in producer regions. Investors are worried that the supplies will be cut off to importers. If that were to happen, prices would rise.
Growth around the world also makes an oil a good investment.
The biggest consumers, such as China and India, have pro-growth leadership now. That increases the demand for oil. The United States and Europe appear to be recovering from The Great Recession. With those major economies on the move, the demand for oil will increase.
That appeals to both speculators and investors.
Speculators like Big Oil securities as the price will rise when there is trouble around the world. That has nothing to do with the fundamentals of long term supply and demand. Speculators rush in and out based on the situation, hoping to book a profit.
Investors like Big Oil due to its role in long term economic growth. A modern economy needs massive amounts of oil and natural gas. It is used as a fuel, obviously. It is also used in lubricants, chemicals, solvents, and other liquids needed for a modern economy.
No matter the investing style, both investors and speculators should continue to do well investing in the Big Oil sector!