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It’s Time to Invest in Oil Again! |
By Ted Peroulakis
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.
Best Wishes,
Ted Peroulakis
[Ed. Note: Ted Peroulakis, MBA has dedicated his
life to the study of finance, economics and investments. His
expertise is in showing investors how to invest and profit in natural
resources, options, bonds, currencies, futures and stocks. His
passion is protecting and growing people’s wealth. Ted Peroulakis
suggests you look into Russell McDougal’s service, which has had a string
of big winners in the natural resources sector.
Click here to learn more... ]
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