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Joe Terranova: Oil Standout Commodity in 2011

As snow and ice continued to shut-down portions of the southern U.S. Monday morning Fast Money’s Joe Terranova was looking to the energy sector to heat up. “When you look at the commodities space, I believe oil is going to be the standout in 2011.”

If Monday's price action is any indication, he may be right. Crude rallied on news of a pipeline shutdown in Alaska and continued China demand. The shut pipeline carries about 15% of U.S. crude.

It was closed on Jan. 8 after officials spotted a leak. China’s oil imports, meanwhile, climbed 18% last year, according to customs data released today.

The call on crude may seem counterintuitive to anyone watching oil’s performance last year. Crude missed much of the 2010 commodities rally, rising about 10% as agricultural commodities and metals surged upwards of 30%. Crude futures are down about 2% this year so far.

However, as Terranova often says on Fast at 5, he believes that the global recovery is well underway and as economic conditions improve the world around he expects demand for oil to march higher. And that makes supply tight.

Terranova, Virtus’ Chief Market Strategist, isn’t the only man making a bullish crude bet.

Fast Money Contributor Dennis Gartman got long oil since the charts indicated a move toward backwardation. When a futures market is in backwardation, demand is so strong that investors are willing to pay a premium to have the commodity now rather than allow it to be put in storage.

Bullish energy bets were emerging as a theme of the day.

Hedge funds doubled their bets last week on last year’s biggest commodities loser – natural gas – according to the Commodity Futures Trading Commission’s weekly report, released today.


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