< Return to Bulls pageDemand, Inventories, Inflation Drive Dig Higher
Up until this point the Oil story has been somewhat perplexing. Investors couldn't get a handle on whether the WTI crude futures were trading too expensively in the high 40 dollar range because (1) U.S. dollar strength has been keeping the commodity cheap, (2) demand seems to have bottomed but the fundamentals of the economy are still headwinds and (3) the inventories of refined gasoline and crude oil sitting in tankers hasn't made a convincing swing to negative growth.
As of Wednesday the deflation threat is null and void. Bernanke is dumping cash from helicopters throughout the country's skyline pumping over a trillion more dollars into the money supply. On top of this the current account deficit is shrinking and U.S. government debt is being bought by the Fed, which will cause the dollar to peak and begin to succumb to the inflationary forces from every angle.
The demand and inventory stories have shown tangible signs of bucking their recent trends that have left WTI crude at such low levels, as compared to their highs above 140. The argument that a bullish Greenback would keep WTI futures cheap has been the major force against the upward momentum of this "lifeblood" natural resource.
Rather than trying to play the cyclical swings of the USO or trying to pick a winning company, get long oil using the DIG ETF. It's an Ultra, so you know you're getting a solid return on your trade, and it is a great inflation hedge to your portfolio as we head forward through this cycle.
If you aren't convinced, watch the new homes sales data next week and form a more solid thesis as to where the overall industrial sector is going, which will drive DIG higher.
