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Oil Prices on the Rise

Commodity traders that bought oil at recent lows had a nice surprise today. For the first time since July, the price of a barrel of oil topped over $100. With over a 2 percent increase for the day, oil is currently at $101 and increasing. The price of oil has been steadily increasing over the last few weeks, and the waiting for commodity traders has finally paid off.

Oil is an interesting commodity because, unlike many other highly traded commodities, there is only a limited source of crude oil on the planet. Coffee, the second most traded commodity in the global marketplace, is fully replaceable. Every year, a new crop grows on the trees within coffee plantations. But with oil, the replacement process takes thousands of years. If we want more, we can’t just grow a few more trees.

OIL still oscillates in price like other commodities. But on a larger scale, oil will never reach the lows that it once had. This makes it a rather poor candidate for a short position. If you are looking to trade oil as a commodity, you will of course want to wait until its price is at a relative low before you enter in a long position, but realize that the lows of yesterday are not going to reappear. If you are looking to enter a trade, buy as low as reasonable and prepare to see the price per barrel increase greatly over time. This is not an overnight process, but rather a longer term position trade.