How to Invest in Oil—Stocks vs. Commodity: Strategists

Oil prices fell for a fifth day Tuesday. Should you invest in oil as a physical commodity or in oil stocks? Darren Gacicia, vice president and equity analyst at Dahlman Rose, and Jerry Castellini, president and chief investment officer of CastleArk Management, shared their insights.

“The view is that the price of oil is going to be firm or expand over time and you benefit from looking for companies that can take advantage of not only the price itself, but growing their own production,” Castellini told CNBC.

Castellini said with oil stocks trading at relatively low prices, investors have an opportunity to get in now. (Scroll down to see his full stock picks.)

In the meantime, Gacicia listed four major reasons why oil commodity is the better buy:

1. Marginal cost curve for oil is steep.

2. Capacity for OPEC is starting to come down (sign of market tightening)

3. Demand forecast from IEA trending up since mid-2009.

4. Potential “scarcity premiums” may outweigh high western inventories.

Castellini’s Picks:

Whiting Petroleum

SM Energy

Brigham Exploration

EOG Resources

Scorecard—What He Said:

  • Castellini's Previous Appearance on CNBC (Aug. 16, 2010)

CNBC Data Pages:

More Energy Plays—Read and Decide:

CNBC Slideshows:



No immediate information was available for Castellini or Gacicia.