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TheStreet Open House

5 Reasons to Buy Oil Stocks Now: Opinion

Stocks in this article: IYEXOMCVX

OPEC Cutting Back

The recent uptick in production from the OPEC cartel was just a stopgap measure amid unrest in Libya, according to recent reports. The member states pitched in to help but clearly have no long-term interest in cranking out crude when prices remain at relatively depressed levels compared to $100-plus oil just a few months ago. You can bet that as oil prices continue to languish near one-year lows that the prospect of additional cuts will be weighing on OPEC's collective mind.

Also See: 10 Stocks That Meet Buffett's 'Golden Rule'

Middle East Unrest Persists

As the spike in oil prices this spring shows, a risk premium has been priced in to oil. Amid the so-called "Arab spring" is a boon for democracy in the Middle East, but you can bet that the push for a Palestinian state and widespread unrest in Libya, Syria, Yemen, Egypt and Tunisia (to name a few countries) is going to have a destabilizing effect on global energy markets. Higher uncertainty means higher crude oil prices.

Also See: 5 Stocks to Boom on iPhone 5 Release

Weaker Dollar is Inevitable

Most investors should be painfully aware of the inverse relationship between the greenback and oil prices. Simply put, as the dollar goes up in value, the price falls for commodities like crude (oil as well as corn and rolled steel and others). That's because a stronger dollar can buy "more" of a given commodity like crude at the same price. The strength of the dollar has been a big downward force on crude oil in 2011, but don't expect that trend to last. Given the free-spending ways and rock-bottom interest rates in America, the relative strength of the dollar will inevitably erode. Yes, the greenback has been desirable lately -- but only compared to the train wreck in the eurozone. Simply being the least worst currency is not a ringing endorsement, and a weaker greenback should hit the markets soon and once again drive up crude oil prices.

Also See: It's Not Too Late to Sell Netflix

Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he owned a position in the IYE energy ETF but none of the individual stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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