Stock Bulls Piggyback on Commodities Rally

Fundamentally, supply and demand factors are not out of whack, says Adam Sieminski, chief energy economist at Deutsche Bank. Take oil. Traders are skeptical that OPEC is really cutting supply, while non-OPEC nations are not making as much oil as they expected. And concerns about the U.S. and global economies have been waylaid, so demand is expected to remain strong. "That adds up to a strong fundamental picture for oil," he says.

In terms of the technical factors, oil hit a short-term bottom at $50 per barrel, says Leo Mariani, senior energy analyst at RBC Capital Markets, adding that speculators and cold weather in the U.S. helped form that resistance level.

Sieminski believes oil will average $62 per barrel this year. Joe Palmisano, technical analyst at IDEAglobal, expects this rebound in oil to reach $58 per barrel in the next couple of weeks, only to sell off again and find resistance at $48 or $49 per barrel.

The U.S. government got in on the bargain prices as well Tuesday with an announcement that helped seal oil's bullish move. Ahead of President Bush's State of the Union Address, U.S. Energy Secretary Samuel Bodman said Tuesday the U.S. will start buying 100,000 barrels of oil per day to replenish the Strategic Petroleum Reserve.

The U.S. depleted the reserve in the wake of hurricanes Katrina and Rita in 2005, but had stopped building it back up last summer when the price per barrel reached as high as $78. The administration also said it plans to double the size of the reserve to 1.5 billion barrels over the next two decades.

Bush is expected to address the issue of U.S. energy consumption in his speech Tuesday. Many believe he'll make another push for alternative energy sources, which also could boost the price of corn to new dramatic highs --much to the chagrin of people who eat lots of tortillas.

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