NEW YORK (TheStreet) -- Crude oil prices rose by more than 3% to settle north of $77 a barrel on Tuesday; however, the commodity's future is uncertain.

This recent rally has been primarily driven by an optimistic outlook on the economy and positive earnings reports. Consumer confidence is on the rise and there is a strong outlook in manufacturing, illustrated by the recent rise in the Institute for Supply Chain Management's index, which hit its highest levels since August 2004. Both factors are expected to boost demand for crude.

Other factors that have been supporting the price of black gold include an increase in China's appetite for foreign oil and an overall sense of optimism for oil demand.

One uphill battle that crude oil will likely face is an overhang in inventory. In fact, it is expected that absolute inventory volumes of crude oil will remain well above levels seen a year ago. To add to inventory woes, production levels are keeping up (if not slightly surpassing) demand, contributing to a surplus in global inventories.

Additionally, it appears that political instabilities in regions like Nigeria haven't had significant impacts on the price of crude.

At the end of the day, there are positive and negative factors that will influence the price of crude and the commodity will likely remain volatile. As for the average price of crude in 2010, experts suggest that the price of West Texas Intermediate crude will average significantly higher than in 2009.

Some possible plays on crude include:

  • the US Oil Fund ( USO - Get Report), which closed at $37.53 on Tuesday;

  • the Path S&P GSCI Crude Oil Ttl Ret Idx ETN ( OIL), which closed at $24.96 on Tuesday;

  • the PowerShares DB Oil Fund ( DBO - Get Report), which closed at $26.64 on Tuesday.

    Due to crude's volatility and inherent risks, use an exit strategy that triggers price points at which an upward trend could potentially be coming to an end.

    According to the latest data at www.SmartStops.net, the price points for the aforementioned ETFs are USO at $35.77; OIL at $23.78; and DBO at $25.48. These price points fluctuate on a daily basis and reflect changes in market conditions. Updated data can be found at www.SmartStops.net.

    Written by Kevin Grewal in Laguna Niguel, Calif.

    Disclosure: No Positions

    Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.