More Upside Than Downside to Long Term Oil

I have been extraordinarily busy this past week, so I did not watch the markets as closely as I normally do. I did, however, purchase more oil stocks and stocks in a couple other sectors. Although I did not load up the proverbial boat with oil stocks, I might further increase my exposure soon.

Those who follow my blog know that I am an oil bull, believing that oil prices will continue to rise because of the inability to match supply with demand at current prices. However, there might be some further downward pressure on oil stocks as the northern hemisphere enters the spring season and the demand for oil is temporarily lessened. Of course, the current market turbulence might further add to the downward pressure.

That said, I believe that the stocks of oil companies are unlikely to fall much further. Put differently, there is much more upside than downside, especially as you lengthen your time horizon beyond one year. As time progresses, the world demand for crude oil will continue to increase. As the volume of oil consumed increases, the amount of crude that must be found just to replenish the natural decline of existing oil fields also increases. And then, more oil must be found to satisfy the increased global demand. Thus, those companies that have large reserves should do well.

Comments

[speculators...:]

Of course you're going to predict that oil will continue to rise, what "BULL" is going to predict that the price will fall? Better take a quick look at the economy pal, it's on a downward trend and not just in the good ol' U S of A. You're greed is going to get the best of you and I'll giggle my ass off when it catches up to your speculation ideals!

2008 Jan 28 08:48 AM