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Low Priced Oil: Get Out Of Town



August 16, 2011 – Comments (0) | RELATED TICKERS: UNG , USO , UGA

Oil has had a rough past week, but this rough patch is only a patch and will be gone soon. Many analysts believe that oil will be right back up where it belongs before too long. Kenneth Rapozaexplains the rationale behind this and what you should be expecting to come next.


“Global oil demand growth is on a solid upward trajectory, as structural changes in non-OECD countries underpin most of that rise,” writes Amrita Sen, a Barclays energy strategist in London. “The ineffectiveness of the supply side to catch up with it has created an extended period of supply capacity tightness, which will be apparent in 2012. Against that backdrop, key oil producers seem set on a sustained path of far higher social expenditure and therefore far higher oil price requirements…$100 oil, in our view, is the new sustainable norm.”

Main Street investors can trade oil through futures, options, the iPath S&P GSCI Crude Oil (OIL) fund, or leveraged plays like ProShares Oil & Gas (DIG). Barclays recommends equities of producers with operating leverage to oil. “In equities, we also recommend oil biased names, preferring those that offer growth, whether in production, exploration or cash flow. We see best value at present in the upstream biased integrateds, oil-biased E&Ps and oil services.” ' 


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