— “Ahead of the Street” Column, by Mitchell Clark, B.Comm.
Is China really behind the high price of oil? I think it is. It isn’t a political conspiracy though; rather, it’s speculators bidding up the price of a barrel of oil after reading that China’s economy is accelerating. China’s economic growth is the big bet that traders want to speculate on. There really isn’t enough economic enthusiasm anywhere else.
I always like to follow a number of benchmark stocks, and Exxon Mobil Corporation (NYSE/XOM) is an important global business to follow. If you bring up a chart on the stock, you’ll notice that, for about the last 12 months, $65.00 per share has been a real support level. The stock’s now trading around $75.00 a share and, like the spot price of oil, it has recently broken out of a noticeable trading range.
These kinds of consolidations (on the stock market) are important and telling. I always like to discover a stock that’s been trading range-bound with a noticeable support level. The more the trading action is range-bound, the higher the probability that a new breakout will be substantial.
If the economic story in China stays consistent or gets better over the coming months, the price of a barrel of oil could easily appreciate to the $90.00-per-barrel range. This puts the domestic U.S. economy at a disadvantage, consumers especially.
The Chinese economic investment theme is one that we can’t ignore going forward. Global capital markets won’t let us. I do believe that Jim Rogers (former partner of George Soros) is correct in his assessment that the commodity price cycle has much further to run over the coming years. This very much includes oil and gold, but he also predicts that the cycle will move into agricultural commodities.
My gut feeling is that we are coming to a crossroads of sorts in all capital markets. I get the real sense that we’re at the beginning of a new renaissance period in the global economic balance. Explosive new economic trends are about to take hold and, as investors, we have to take part.
China’s economic influence is beginning to dominate investor sentiment in oil markets. This is only the beginning of its influence in capital markets. We’ve seen it this year already in the daily trading action of stocks in New York.
Jim Rogers moved his family to Singapore and now has his children learning Mandarin. As a serious investor or entrepreneur, it’s one of the best ideas going.