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Second Half Set-Up: Oil

After a wacky first half, expect the unexpected during the next six months.

One surprise that’s already astonished so many investors is the recent spike in oil prices.

With fears of a depression dragging down the global economy earlier this year, no one expected the oil bulls to run. But run they did; the price of oil has doubled in just 4 months.

And some Wall Street firms are calling for those gains to continue, largely fueled by global demand and hedge fund buying.

In fact, crude rose above $69 a barrel on Wednesday, supported by news of a bigger-than-expected draw in stocks and growing geopolitical troubles in some OPEC member countries.

However the oil bulls aren’t entirely in the clear.

With recent signs of weakness in the US consumer, over the past few days the oil and gas trade lost its mojo. In fact the Energy Information Administration (EIA) said Wednesday that U.S. distillate supplies jumped to their highest level in more than 10 years.

Considering the price of oil has been flipping and flopping like a fish out of water, where is it heading?

I think in the second half of the year demand for oil from emerging markets will become robust, speculates Joe Terranova. I also expect a weaker dollar in the months ahead. Both factors should put support under the oil market. In fact, I think it prints $85 before the end of the year.

As a result, I suggest long positions in Hess, Petrobras and Suncor , he counsels.

However, Addison Armstrong of Tradition Energy sees the space a little differently. On Fast Money's Halftime Report he said, if oil doesn’t get back above $71 and the Dow Transports fail, I think oil heads toward $60 pretty quickly. (Of course Armstrong is talking a shorter time horizon than Terranova but it's still quite a contrast.)

And if you're looking to play the space for valuations, Fast Money's resident value investor aka Karen Finerman recommends looking at Anadarko and/or Transocean .


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Trader disclosure: On June 24th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (MSFT), (WMT); Firm Is Short (WFC); Finerman's Firm Is Short (IWM), (SPY), (MDY), (IJR), (USO); Finerman's Firm And Finerman Own (BAC) Preferred Shares, Finerman's Firm Is Short (BAC); Finerman's Firm And Finerman Are Short (WFC) Preferred Shares, Finerman's Finerman's Firm And Finerman Own (FLS); Jon Najarian Owns (AAPL), (BRK.B), (JPM), (MS), (RIMM), (WFC), (WMT), (YHOO); Jon Najarian Is Short (AZO); Terranova Owns (TER), (XBI), (BTU), (ABT), (RIMM), (HES), (MS), (MSFT)

Terranova Works For (VRTS); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV), (ABD); Virtus Investment Partners Owns More Than 1% Of (ABD), (CAL), (CLB), (DLR), (EPR), (EXR), (IGE), (MEE), (DBC), (DBV), (DBA), (SKT), (UA), (WBMD); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co


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