I want to elaborate a little on why I am bullish on oil. I am not bullish because of industry fundamentals—i.e. I do not think there is more demand than supply. The reason oil is a good buy right now is a question of macroeconomics. As long as our economy is in a downturn and our financial system besieged, the Fed will keep interest rates at 0. This is reflected in the implied fed funds rate (from Cleveland Fed):
Also, the Fed will continue quantitative easing and keep treasury yields low. Third, investor’s risk appetite will return, as we’ve already seen in equity markets. Therefore, investors will start leaving safe US dollar assets like treasuries at greater rates. Because of low interest rates, the US dollar has little support. As the dollar falls, the price of oil will become greater because more dollars will be needed as payment. It’s that simple. (It also doesn’t hurt that the memory of $145/barrel oil is still fresh on speculators' minds.)
