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Wednesday, August 23, 2006

Bold Bets by Institutional Players on Oil & My Take

By Yaser Anwar CSC of Equity Investment Ideas

Some increasingly vocal bears are making stark forecasts. Sanford C. Bernstein & Co. energy analyst Ben Dell is calling for $50 crude in early 2007.

Philip Verleger, an independent energy economist who heads PK Verleger LLC, predicts in an interview that oil could hit the single digits in the next three years.

In particular, they say, the market hasn't fully grasped the import of investment flows into oil futures and the danger that a slowdown in those investments could cause a lull or even a panic in the oil markets.

Institutional money managers have $100 billion to $120 billion in commodities, at least double the amount three years ago and up from $6 billion in 1999, says Barclays Capital, the securities unit of Barclays PLC.

My Take- Oil in single digits in next 3 years? Yeah sure (rolling my eyes), unless there is some miraculous alternate energy utilized, oil won't be getting anywhere near those levels.

MidEast crisis from hereonin will get a lot worse before it gets better.

It will take a minimum of 3-4 years for Ethanol factories to fully process & produce Ethanol.

Demand from India & China will keep rising

Hardly any new oil rigs have been built in the past decade, so any supply disruptions will only prop up the price (reminiscent of BP's recent Alaska catastrophy)

Govt. needs to encourage various forms of alternate energy such as: Solar & Wind Power, like it did for Ethanol.

Use of Coal needs to rapidly increase, among other commodities

Unless some/all of the above & more occurs, forget single digit oil prices. Every now & then we will have a few ups and downs in oil prices, but long-term its all leading to a 90$ barrell of oil. Either protect yourself with investing in SJT, BPT & other oil income trusts & stocks, or suffer at your own expense.

Source of 1st four points WSJ

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