I believe this will create another glut . . .
Many of you are considering adding to your oil or energy positions as a result of energy going up. Let's not get too excited and overly enthusiastic about doing this. Number one, you need to be careful about having too much energy in your portfolio. You do not want to be so over-weighted that it will be hard to keep a balance in your asset allocation model. That is one concern.
My other caution is that I think prices are going to go down. Due to what I consider to be kind of a global foolishness (ramping up production as a result of just a mere five weeks of lower inventory numbers), I believe this will create another glut. We will then be right back to where we were and, in all likelihood, we will see oil prices come down. Those oil prices coming down could be significant which will weigh on oil stocks and drive home a bit further the idea that they will not be ramping up production any time soon.
I think all of this must be taken into consideration before you start adding to your oil stocks. Perhaps I will be wrong about this and we will see a run-up . . . or oil prices might stabilize here and stay for quite some time. But I do think there will be some continued downside pressure on oil stocks. I would not be at all surprised if we see $35 to $40 a barrel for a short period of time.