Coming Week: No Top for Oil?

With action on the stock market front slowing down next week, oil's intrepid rise continues to grab investors' attention.

Crude climbed to around $126 a barrel on Friday, as the fundamental tight supply/strong demand picture remained intact and investors continued to pour into the space.

Buying is coming from both the commercial and investment sides of the market, says Darin Newsom, senior commodities analyst at DTN. "The investment money continues to flow into crude oil on the idea that it is going to go up."

ETFs such as United States OilUSO and iPath S&P GSCI Crude Oil Total Return IndexOIL allow investors to track the commodity with relative ease.

"In this type of environment, there really is no resistance level," he says. "We could have another couple months of this" move higher.

Eric Wittenauer, energy futures analyst at Wachovia Securities, agrees.

"At this point, any correction or pullback in prices eventually leads to a rally that results in record prices," he says. "It's too early to call an end to the trend."

"To the degree that hedge funds or whomever can borrow at close to the fed funds rate, there's incentive to borrow [money] and buy oil, because the funds rate is below the inflation rate," Paul Kasriel, chief economist at Northern Trust, points out.

But notes of caution are being sounded amid the investor party.

"As strong as this [oil] market is, the higher it goes, the more wary to have to be," says Phil Flynn, vice president at Alaron Trading. "Even in the strongest markets you can have wicked corrections. When the market looks like it has a sense of bullish inevitability, the come-lately guys can get hurt really bad."