Thanks to a strong dollar and sluggish demand, prices in the
energy commodity world have been quite weak this year. In fact,
crude oil in WTI terms has slumped by about 21% so far in 2012
while Brent crude-the European benchmark for the commodity-has lost
about 12.2% in the same time frame.
These kinds of performances would have been unfathomable just a
few months ago when the U.S. economy was on the mend and political
risk from Iran and other Middle East nations was leading many to
think that supplies would not be able to keep up with demand.
However, in just the past six weeks, oil prices have taken these
solid gains and turned them into heavy losses, pushing crude oil
down double digits in just the past month alone.
Given the ongoing-and apparently spreading-troubles in Europe,
as well as the increasingly strong dollar, many are forecasting
that oil prices could have further to fall this year. Credit
Suisse, for example, looks for oil to drop to
if a severe credit crunch hits the market, while the EIA has
recently reduced its price target (
although not as drastically
) for crude prices in the second half of the year as well.
Yet despite this bearish outlook, there could be a few reasons
to be optimistic about oil prices in the second half of the year. A
step in the right direction for the euro crisis could be bullish
for demand across the board while a return to turmoil in the Middle
East-possibly with a Syrian civil war as a catalyst-could boost
prices as well (also read
Three ETFs For An Iranian Crisis
Furthermore, an expansion of QE programs in some of the Western
world's key central banks could also be a positive for oil as it
may once again stoke fears of inflation and reignite demand for
commodities and other real assets once more (read
Follow Goldman into Commodities with These Three
Clearly, oil could go either way as we head into Q3 and either
continue its recent slump or rise back towards the triple digit
level. What do you think will be the case?
Also given the uncertainty, is it better to play oil via the
commodity (such as with
), oil producers with stocks/ETFs like
, or the relatively safe and high payout space of MLPs with options
Let us know what you think in the comments below!
JPM-ALERN MLP (AMJ): ETF Research Reports
US BRENT OIL FD (BNO): ETF Research Reports
CHEVRON CORP (CVX): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis
US-OIL FUND LP (USO): ETF Research Reports
SPDR-EGY SELS (XLE): ETF Research Reports
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