Three Reasons to Own Oil E&P Companies: Update

by: Daniel Moser

In the last post I wrote on Seeking Alpha, I wrote 3 fundamental reasons to be long oil Exploration & Production stocks. I have an update to that post.

Thursday, June 11th, the International Energy Agency (IEA) "raised its 2009 world oil demand estimate for the first time in nine months but cautioned that the move does not necessary point to the start of a global economic recovery. In its latest monthly oil market report, the IEA adjusted its 2009 demand forecast up 120,000 b/d as a result of stronger-than-expected OECD data from the first quarter of the year."

In case you didn't read my most recent post on the 3 fundamental factors to be long oil E&P companies, I will fill you in:

1. OPEC cuts are more than enough to offset declines in demand even by the most bearish of demand forecasts - which were just revised higher by 120,000 barrels per day by the IEA Thursday.

2. Weak dollar doctrine will fuel commodity inflation in the United States.

3. Demand is stabilizing for consumer fuels. Global growth in demand will set in and the revision to the IEA forecasts could be the start of just such a trend.

Disclosure: I am long: PCU, VALE, NUE, PSEC, HERO, ETV, and VLO (Calls). I am short: SPY