Crude Oil: The Best Bet for 2012

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Crude oil may not only be the best commodity play for 2012, it could prove to be the best commodity play of the next three to four years, soundly beating both gold and silver. I’m not talking about oil producers, refiners or drillers…or any individual stock – but the real thing: crude oil itself.

Don’t get us wrong, we still like gold and silver and will probably recommend jumping back into silver shortly. But you can’t pour gold into a farm tractor and use it to grow more food. You can’t pump silver into a 747 and use it to transport cargo. You can’t use gold or silver to make overall production more efficient and generate a higher standard of living. In fact, you can’t do any of these things without crude oil. This is why crude is and will continue to be the world’s most essential commodity.

5 Reasons to Buy Crude Oil Now

1) Oil supplies have peaked – oil supply lags discovery by approximately 40 years. New oil discoveries peaked in 1965. Not surprisingly, production has basically flat-lined since 2005. Despite all the press given to new deep water discoveries and North American shale supplies, new production is not keeping up with the depletion of old wells.

Oil supplies have peaked

2) Producing nations are consuming more of their own output and exporting less. Saudi Arabia, Iran, Norway and Venezuela are exporting far less oil than they did in 2006.

3) Global population is growing rapidly and more people are growing accustomed to better, more energy-dependent lifestyles.

4) Crude oil is decoupling from the dollar. For most of 2011, crude oil was a “risk on”, short dollar play. No longer. Crude is rallying in both strong and weak dollar environments. This is bullish.

5) The odds of a pre-emptive strike against Iran (the 3rd largest oil producer) are the highest they’ve been in years. 33% of global tanker traffic passes through the Strait of Hormuz which Iran has threatened to close in retaliation for global trade sanctions. Expect it to make good on those threats if bombs start falling on its nuclear facilities.

Therefore, we believe crude has a better chance of doubling from its current $100 per barrel level than gold has doubling from its current levels of $1,575 per ounce. It’s not that we hate gold. We don’t. Some of the same conditions that favour crude will also favour the shiny stuff. But for “bang for the buck,” we feel crude oil is the best opportunity on the board right now.

Publisher’s Note: This is an edited version of an article that originally appeared in The Daily Reckoning US (www.dailyreckoning.com).

Steve Belmont is a founding partner and Senior Market Strategist for the RMB Group. He is also managing editor of the exclusive US alert service, Options Edge.

Steve Belmont
Steve Belmont is a partner in the RMB Group, an options firm based in Chicago, Illinois, U.S.A.
Steve Belmont

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Comments

  1. Anyone know where I can get some empty oil barrels? Seriously though, how do you invest in the black gold? Not to clued up on that one. Help!!

    shortchanged
    January 10, 2012
    Reply
  2. The gold antagonizers will claim you can’t eat oil so forget it !

    Buy shares in oil and gas companies, Port Philip Publishing offer a share recommendations, it’s really hard to research yourself.

    LINC energy maybe something to look at…….it been hit hard because it is not paying dividends…..but a good business model and good potential

    Reply
  3. Thanks SG, I shall do some googling.

    shortchanged
    January 11, 2012
    Reply
  4. How to buy oil? The author of the unedited version (see link in 3rd last line of article above) suggests ways to buy oil.

    fascinated8
    January 12, 2012
    Reply
  5. How to buy oil?

    Like crude, you cant….not for the everyday person anyway.

    If you are like the Clampets and you have “bubbling” crude in your back yard then you can buy property and go no to sell it and move to Hollywood.

    If you are interested because you think oil is becoming a problem look at oil services complies too, like the ones with technologies to squeeze a little more out of largely depleted wells etc etc. these companies are going to be needed more and more.

    Reply
  6. SG: Link energy up 17% today, did any one listen?.

    shortchanged
    January 13, 2012
    Reply
  7. your comments on oil are correct i believe in october israel will strike iran, i believe euro first us dollar second will come down hard( devalue) against gold us will enter the war, elections may be postponed and martial law implemented, obama already signed the NDAA act into law on 31 dec 2011, this crises has at least four heads meeting more or less simultaneously. have been following the background info closely and am 100 percent in phys aux.

    chris hellinger
    July 30, 2012
    Reply

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