Investing in commodities—especially energy—has always been a way to make money in a weak economy, and this past year was no exception, Kiplinger’s reports. As the economy suffered, pension funds, hedge funds and mutual funds linked to commodities grew. However, as crude oil reaches $135 a barrel, the success of commodity investment might be facing a change

 

Due to the high prices of oil, demand is falling drastically across the globe in high-usage areas such as the U.S. and China. In conjunction with this decrease in demand, new supplies worldwide, from Saudi Arabia, Kazakhstan, Nigeria and Canada, are set to hit world markets in the later half of this year. These combined market actions will inevitably reduce the price of oil, an action consumers have been waiting for, for months, as they have watched the price of oil increase daily.

 

While this is good news for the average consumer, the investors who have stock in energy holdings or in companies directly associated to commodities, might be on the losing end of this market change. As crude oil prices deflate, stock prices of commodities throughout the industry are expected to sell.

 

Despite these predications, commodities are still a lucrative investment; however, one must be cautious in deciding what companies and commodities to invest. Companies that lead the way and are at the top of the industry are solid investments, as industry managers Charles Ober, from T. Rowe Price New Era, and Ken Settles, from RS Global Natural Resources, give their support of Schlumberger, the world’s largest oil-service company, and other leading businesses.

 

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.