Oil has gone from about $38 per barrel to around $58 per barrel in the last two months. The recommended plays from the last two articles have also run.

The two ETF’s I have recommended have performed exactly as advertised. Both, DXO and DIG have consistently returned at least twice the increase in the price of crude oil. Within days of the first recommendation you could have purchased DXO for as little as $2.71 per share, it’s now about $3.46.

The current price of crude, $58, and the expected price target of $75 per barrel would suggest another 60% gain is possible for both in the near term. At this point the move in the price of oil is almost unavoidable, for many reasons.

In just the past two weeks, two different OPEC spokesmen have stated that oil has to go to at least $75 per barrel, and production will either be cut, or would not increase when the world economy to expands, which amounts to a cut. This is reason enough for the excess oil reserves we have to dry up in a hurry.

With information like this on the street it is conceivable that if any really significant positive information about the health of our economy, or any other key world player’s economy, were to be released we could see a run well beyond our near term price of $75.

The U.S. economy is showing signs of improving. The most recent jobs numbers indicate we are on the right track for a healthy recovery.

The stock market’s recent move is indicative of it reacting to news six months into the future. Six months is about when most believe the economy should be moving into positive territory and the increases we have seen in oil prices are paralleling the upward moves in the market.

We are moving into the summer driving season and increased gasoline consumption. This too adds to the demands on our reserves and in recent years has driven the cost of gas up.

China’s economy is starting to rev up. 85% of their stimulus package was committed to infrastructure as compared to 5% of ours. This has had a more immediate affect on their numbers and it is showing in the rate of recovery.

As the economies of the world start to generate bigger and bigger numbers, the demand for energy will explode again. It’s doubtful we will see $146 per barrel again soon, but it will happen again.

The more immediate opportunity is in the next nine months. The price target of $75 is a forgone conclusion. How much higher it runs is a function not so much of consumption but of anticipated demand in response to how quickly the world economies recover.

So here again are the recommendations, with a new one.

DXO is a pure crude play that will give you two times the return of any increase in the price of crude.

DIG is a crude and natural gas play that also gives you two times the return of the price of crude and natural gas. It isn’t as clean a play as DXO but its return has outpaced DXO a little in the past few weeks.

The new play is a gasoline play, UGA. This is a pure play on the price of gasoline. It pays one to one for any price move on unleaded gasoline delivered to New York harbor traded on the New York Mercantile Exchange.

Gas in my area has moved from $1.99 to $2.29 in a week.

This is a move you must make now or get used to watching from the side lines. As the price moves into the sixties in the next few months, the total return on this play will have dropped to the point that it will have become a sucker play with the uninformed buying at the top.

This will not be a straight shot; you will have a few more opportunities on pull backs to average in and get your overall cost down. But make no mistake; oil is going back to the $75 to $100 range, and maybe higher. You have had plenty of opportunities to take advantage of it.

Source: Last Call for Oil

This from Today’s Financial News:

Even with the threat of a strike, crude prices managed to dip below the crucial $40 level, the unofficial delineator between cheap and moderately priced oil. What will happen through the rest of the week is up to the United Steelworkers.

If the union, which represents some 30,000 employees and about 70% of the nation’s refinery production, votes against the proposed contract, volatility is bound to rise. If a contracted is ratified over the next day or so, then volatility and prices are likely to drop even further.

The union and the nation’s oil companies are working on a day-by-day basis, but insiders say they are getting close to a compromise. In fact, some say it looks like a strike may even be unlikely. But unions have surprised us before and will certainly do it again.

Destroying what’s left

What makes a worker want to go on strike in this economic downturn, especially after they were promised a raise, remains out of my grasp. But then again, what makes unions tick in the first place has always been a mystery to me. They drove large manufacturers out of my hometown, took Detroit to its knees and now they are threatening to tear at the throat of the nation’s last great blue-collar profit maker.

If these workers get the guts to strike, as an investor, you have a few options. You can pick a major oil refiner, like Valero (NYSE:VLO), the nation’s largest, and short it. After all, even a short-term strike will pull down its quarterly profits.

Another option is to play the broader refining industry through an ETF like United States Gasoline Fund (NYSE:UGA). As production falls, gasoline prices will rise.

Finally, you can play the broader energy market through a fund like the Ultra Oil and Gas ProShares (NYSE:DIG). If shares go up, its price will jump at a two-to-one ratio, at least on a day-to-day basis. Be careful with these ETFs as they are calculated on a single day, not a long-term trend. With the right level of volatility, these shares can actually drop in value even as prices rise over the long-term.  They do it quite often.

But do not be certain crude prices will rise because of a refinery-level strike. Chances are, it could be just the opposite. We already have too much oil on the market. If refineries shut down, the supply glut will be even worse. In that case, take the Ultrashort Oil and Gas ProShares (NYSE:DIG).

No matter which slant you take or which way you choose to invest, one thing is certain. The nation’s largest companies are once again out of the predictable hands of a free market. They have been seized by unions and greedy politicians.

It makes the job of an investor even harder, but the profit opportunity is there just the same.

Source: Playing a potential refinery strike