It’s been a rough year for commodities. The Dow Jones-UBS Commodity Index is down 9 percent this year. Gold, silver, and copper have all had their ups and downs, but mostly downs. But oil prices are defying the trend, and analysts are bullish on the commodity’s future as the US economy continues to stabilize.
Analyst Lee Kayser, who helps oversee $1.9 billion in commodity investments as a portfolio manager at Russell Investments in Seattle, explained that when the economy isn't volatile, Americans can be counted on to continue their high rate of oil consumption: "China is deteriorating, Europe is still problematic, but if the U.S. continues to chug along…things are relatively positive" for crude.
Strife abroad has catapulted the price of crude, as protests in Libya have signifcantly slowed production and closed many oil shipping ports. A major oil field there has been shut down for several weeks as well, causing crude exports to slump 70 percent.
Oil has further been bolstered by news the Federal Reserve would keep in place its $85 billion a month bond buying program, thus assuaging fears there would be a “tapering off” of government stimulus. The Fed gave no indication at their two-day meeting that they saw any reason to discontinue the bond buying program, saying that growth was “modest” and not able to sustain itself yet without the program.
While crude gets a boost from the relative global stability the stimulus affords the US, crude oil ETFs surged. United States Brent Oil Fund, LP (BNO) , which tracks futures on Brent oil, is up 1.48 percent, and 6.77 percent on the month, to hit $83.64. One of the most popular crude oil ETFs, ProShares Ultra DJ-UBS Crude Oil ($UCO), shot up 5.16 percent to hit $37.50 a share, and is up 15.56 percent this month.
And the largest crude oil ETF in terms of both volume and assets, United States Oil Fund, LP ($USO) is up 2.68 percent to hit $38.36.
In July crude experienced its largest monthly gain in almost a year. West Texas Intermediate (WTI) crude is at $107.78 a barrel, and Brent crude is at $109.25 a barrel.