Oil ETFs for 2011: One Good Play, and Two You Should Avoid

The protests and social unrest in Egypt have provided an additional tailwind to crude prices over the past week (and we should note that crude had already rallied to two-year highs before the demonstrations began).

Even before the hysterics began in Egypt, the trend in oil was UP. (Source: StockCharts.com)

Walk (and Protest) Like an Egyptian

Since the January 25th “Day of Anger” unrest kickoff, there’s been a lot of activity - mostly bullish - in the oil markets.  First, let’s take a look at how WTI and Brent crude prices have responded.

Crude yawned for a few days...but eventually got into gear.  WTI crude for March delivery is up over 5% in the past week.

Source: BarChart.com

It was a smoother ride up for Brent - though it didn’t run as far as WTI, with Brent for March delivery up over 4% in the past week.

Source: BarChart.com

Brent crude is now trading above $100/barrel - a historically high spread with respect to WTI crude.  (And as an aside, HAI's Julian Murdoch talked about how to play the high Brent-WTI sprad recently.)

And how have our favorite oil ETFs performed since the Egyptian protests began?

Please read the rest of my Oil ETF analysis - including your best plays for the short and long run respectively - at Hard Assets Investor.

Why You Should Consider Shorting Crude Oil Right Now (Hint: Record Long Bets)

Over the longer haul, many of us believe that oil is heading higher.  If you subscribe to the peak oil theory, or at least some derivation of it, this trend is basically regarded as fact.

But for the shorter term, oil may be due for some degree of pullback.  Speculative longs on the black goo is at an all-time high, according to our boy David Rosenberg.  From today's Breakfast With Dave:

We remain long-term secular bulls on commodities, but as the charts below reveal, the net speculative position in gold, oil and copper are far too high right now for comfort. Oil is at a record high in terms of speculative net longs on the New York Mercantile Exchange.

Source: Haver Analytics, Gluskin

Surely, this is because crude is breaking out to new all-time highs, right?  Ummmm, no.

While bets on crude going up are at an all-time high, the actual price of crude is still way off 2008 levels. (Source: StockCharts.com)

Peak oil crowd, beware - if you're making long bets on crude right now, you're not alone.