This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Oil Recharges for Another Move Higher

NEW YORK ( TheStreet) - I've watched the oil move with a bit of pride, I have to admit.

After all, I predicted $110 a barrel prices for the second quarter of 2011 (check the videotape), and I did it in the third quarter of 2010, when oil had barely reached $80. Hitting a target mark is a great moment for reassessment and I've been doing that: For the past several days, the oil market has looked exhausted to me, looking like it needed a break.

Break's over.

Buy Integrateds, Dump Oil Services: Dicker

A couple of pretty solid and interesting moves in and around oil make me fairly convinced that oil is just recharging for another run, one that will take it up to perhaps $120 by the third quarter of this year. If that happens, those integrated oil stocks that have already been market leaders will streak even higher.

First, we have Goldman Sachs (GS). For very obvious reasons (mostly because it makes so much damn money trading oil), Goldman has been very careful about the way it talks talk about speculation in the oil market.

In 2008, at the height of the first oil boom, Goldman clearly stated that speculation had nothing to do with rising prices. The subsequent bust in 2009 forced them to recant that blanket statement, although it's done it exceeding carefully, only admitting to a $9.50 speculative premium even at the height of the boom in 2008, when oil reached $147 a barrel.

It makes these insanely conservative estimates using the CFTC's commitment of traders reports and some black magic calculations of what effect each reported non-commercial holding has on average price, figuring that each million paper barrels of speculative holding delivers an eight-cent premium to oil's price.

Don't ask me how it comes up with that number: Remember we're talking Goldman here, so it must be right.

But here's the thing: Even in the way the underestimated-world-of- speculation effect that the oil traders at Goldman Sachs live under, a recent note from its commodity division noted that the risk premium, considering all the unrest in the Middle East, is being greatly UNDERVALUED -- even here at $104 a barrel.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BHI $53.35 0.00%
COP $51.19 0.00%
CVX $81.55 0.00%
SLB $70.32 0.00%
XOM $75.88 0.00%


Chart of I:DJI
DOW 16,472.37 +200.36 1.23%
S&P 500 1,951.36 +27.54 1.43%
NASDAQ 4,707.7750 +80.6910 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs