It’s Time to Invest in Oil Again!
Source: http://feedproxy.google.com/~r/ContrarianProfits/~3/kdWqcjl6qVo/14878Posted on Monday, March 16th, 2009 | In Market Commentary
Luckily, I was bearish on oil until recently. I said to short oil when it was at $120 per barrel on 04/23/08. I was a little early to the party, but oil did drop below $33 a barrel in December of 2008. Oil plummeted $114 a barrel after reaching its record high last summer.
But, now I think oil has bottomed and will head higher. My fundamental and technical indicators are pointing to higher oil prices.
It’s disappointing that Americans seem to forget about our dependence on foreign oil as oil prices drop. In the 1970’s we got a wakeup call when people experienced gas shortages and rising fuel costs. Then it happened again, when oil spiked up to $147 a barrel last July. You heard lots of talk of switching to electric cars and cutting off our addiction to foreign oil. It’s disheartening that you don’t hear much about this anymore because now we have our cheap gas again.
We need to wake up and focus on finding alternatives to gasoline as the power source in our automobiles. It is time to get off this quickly depleting natural resource. Now that oil is cheap again we see people going right back to their old ways. Americans are starting to buy gas-guzzling SUVs again and the carpooling trend is tapering off. Oil demand will return and oil will go higher again.
We might as well profit on the next surge in oil prices. I think we are looking at a spring rally. The bottom in crude back in December was at $32.48 per barrel. This will likely serve as the low in this cycle. I circled crude oil’s highs and lows on the 5-year chart below to give you a perspective.
Here are just a few reasons why I think oil will run higher:
- There are many potential geopolitical flash points around the world that can flare up at any moment which could disrupt oil supply
- OPEC plans to meet Sunday in Vienna, and a few of the cartel’s leaders have said more production cuts are to be expected
- Crude oil prices held up in the face of new 12-year lows in the stock market last week; this is very bullish for oil
- Oil exploration companies increasingly drilling for oil in harder to reach places, and this adds to the cost of exploration and results in higher oil prices
- Most of the world’s cheap oil has already been discovered, and many experts think the world is running out of oil
- Soon we could see demand increase to a level that will start to exceed supply. Demand will grow in the years ahead as India and China continue to modernize.
While oil inventories are high right now, they may start to decline towards the end of the year. I suggest you start looking at investing in oil over the next few months and use big down days as buying opportunities.
If you invest in oil, keep an eye on the economy. If the current slowdown gets worse and last longer than expected, it could have negative effects on oil prices. Currently my indicators are pointing to higher oil prices in the near term.
The world’s utter dependence on oil remains unchanged. I believe the upside for oil prices is now much greater than the downside in the near term. I think the worst of the great oil bubble burst is behind us.
My esteemed colleagues wrote some great articles on oil recently. Dr. Russell McDougal wrote a great article on oil titled “Don’t Get Comfortable With Cheap Oil. And, Steve McDonald wrote an excellent piece titled “$75 Oil This Year and it Can Put a Lot of Money in Your Pocket”. I suggest you read their articles; they give some great ways to profit as oil prices rise.
Source: It’s Time to Invest in Oil Again!
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