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By Roger Nachman

If you believe Nomura Securities, then oil could hit over $200 per barrel soon, which could be the endgame for the economic recovery.

If the geopolitical unrest extends for any period of time, and WikiLeaks is proven right that Saudi Arabia has grossly overstated its proven reserves, then analyst Michael Lo believes we could see $220 per barrel relatively soon.

Lo writes:

In order to estimate the impact the current MENA crisis could have on oil supply and prices, we analysed past crises that rocked the region. There have been a few events that drove oil prices higher (from 30% to 130% per event), most of which were during the period in which OPEC controlled oil prices. However, we believe the closest comparison is the 1990-91 Gulf War as this is the only event outside of that period. During the seven months of Gulf War, prices jumped 130% as OPEC spare capacity was reduced to 1.8mmbbl/d while demand came off briefly by 1.7%. Similarly, today, if Libya and Algeria were to halt operations, OPEC spare capacity will also likely be drawn down to 2.1mmbbl/d, in our view, which could fuel higher oil prices.

Lo goes on to say:

We have identified three distinct stages of the Gulf war, which led to changes in oil prices and we believe we are only at the initial stage of the three stage process for the current MENA unrest. During the initial stage of the Gulf war, prices moved up by 21%. This is comparable to what we have seen recently when oil price went up by 13% since the beginning of the MENA unrest. As we see further evidence of real supply disruption, we will be moving into Stage 2 of the event – during this stage of the Gulf war, prices moved to its peak (up 130%) within a period of two months. On the assumption that prices will move up by the same amount, we could see US$220/bbl should both Libya and Algeria halt their oil production. We could be underestimating this as speculative activities were largely not present in 1990-91.

If you believe that oil could get that high, then oil related names would skyrocket to the heavens, and have outrageous returns.

Names to consider in this space, Exxon Monbil (XOM) and Chevron (CVX), are among the better integrated majors to buy for higher oil prices. If you like ETFs, United States Oil Fund LP ETF (USO), United States 12 Month Oil Fund, LP (USL), Direxion Daily Energy Bull 3X Shares (ERX) will do well in this scenario.

Another name to consider is Occidental Petroleum (OXY), which is a name that is generally most associated with the spot price of oil.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: How to Play $220 per Barrel Oil