Lately it seems like it’s been easier to strike oil than trade it. After reaching a record high of $147 prices have done nothing but slide lower, almost on a daily basis.
If you’re bearish you have good reason. The climb was likely due to weakness in the dollar which has started to at least level off if not get stronger. And according to AAA high prices at the pump forced people to curtail their travel, which in turn drove down demand for gasoline.
But there’s also reason to believe crude is going higher. The International Energy Agency or IEA said demand is expected to remain unchanged at 867.9 barrels a day because the need for oil in developing nations remains strong. Also Goldman Sachs, one off the most influential oil desks in the commodities market reiterated its year-end price forecast of $149.
What should you expect?
The speculative froth has been lifted from the oil market and it’s now back to being a fundamental story, says Joe Terranova, Fast Money's favorite oil trader. At the end of the day oil production numbers are down on a year-over-year basis. I expect oil to trade in a range for a while.
The way I recommend playing it is with National Oilwell Varco in the oil space, Freeport McMoRan in the copper space and the Coal ETF in the coal space.
I’m also looking at the United States Natural Gas Fund, adds Jon Najarian. I’m seeing a lot of out of the money calls in this ETF which suggests it could go higher.
What do you think? Answer the Charles Schwab Question of the Day!