Oil to $100? If so its Time to Buy the Oil Equities (USO, XOM, DIG)
If oil is headed to $100, the obvious plays are the United States Oil Fund LP (ETF) (NYSE:USO), Exxon Mobil Corporation (NYSE:XOM) and our favorite the ProShares Ultra Oil & Gas ETF (NYSE:DIG).
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(BusinessWeek.com)Why Oil Could Top $100 a Barrel
The weakening dollar could trigger a steady rise in the price of crude, sending it over $100 next year
Oil prices have hovered around $78 a barrel most of the year, providing little excitement as other commodities, including copper, gold, and cotton, have enjoyed record runups. Global economic growth has not been brisk enough to drive up oil demand substantially, U.S. inventories have been ample, and the Saudis have been pumping enough to guarantee a plentiful supply.
A change in the oil markets may now be upon us. Crude may climb past $100 next year as central banks pump cash into their economies to revive growth, predict JPMorgan Chase (JPM) and Bank of America Merrill Lynch (BC). The Federal Reserve's decision to buy $600 billion of Treasuries from commercial banks should lower U.S. interest rates and weaken the dollar further. Investors may turn increasingly to oil and other commodities to get a decent return.
The Federal Reserve's actions are "likely to push prices upwards," says Antoine M. Halff, head of energy research at Newedge USA in New York and former principal administrator at the International Energy Agency. "The past few years have shown that the more cheap money in the system, the more money flows into commodities, in particular energy." Since the start of September, oil prices have climbed 17 percent, to a recent $86.96.