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Still bullish on oil...and oil stocks

|Includes:Statoil ASA (STO), USO

Oil plays have lagged the rest of the resource boom, but now that OPEC is guiding investors to get used to the idea of crude at $90 a barrel, energy prices could join the party.

The fact is that  strong demand  for oil from emerging markets like  China  is coming at exactly the moment when global supply is slipping. Non-OPEC oil production is on track to shrink a total of 2.2 million barrels a day over the next five years, while rising OPEC output will not be able to cover the shortfall even if Iraq gets on line faster than expected.

As a result, even if global demand edges up only a little, the slack available to keep the oil industry humming through outages — weather, labor disputes or geopolitical events. By 2012, spare capacity may be as narrow as what we saw during the oil crisis of 2007-8, and from there, things get even tighter.

Although there is plenty of gas out there, increased consumption of gasoline and other liquid fuels should keep the demand factor for petroleum high. The question is whether a slight upturn in oil prices — possibly $100 to $105 a barrel in the next few years — translates into a brake on economic activity.

In this kind of environment,  Russian  oil companies are probably the best way to get exposure to the commodity price. They have massive reserves and are currently boosting production to record levels.  Rosneft  would be an obvious name to play here, but the ADR is extremely thinly traded.

Gazprom OGZPY and Lukoil LUKOY are better ways for U.S. investors to get involved:

Beyond the Russians, consider companies in the hot fields of the Arctic and Western Africa: Statoil STO or Afren AFRNF and Tullow TUWLF.

And naturally, all this activity is going to be great business for the  field service  group.

Finally, to play oil itself, the crude ETF  USO has been hot:

Disclosure: no position
Stocks: STO, USO