How to invest in oil as Iran tensions build

Fri Dec 30, 2011 10:05am EST
 
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By David K. Randall

(Reuters) - As the year comes to a close, investors are finding themselves in a position they didn't expect: The U.S. economy looks to be growing more than most analysts anticipated.

It is hard to say whether that growth will continue to accelerate next year. But signs that the economy may be improving have lifted oil prices already. That's partly because energy companies often lead the way during expansions as more trucks loaded with goods clog the highways and more workers fill up their tanks on the way to work.

But don't run out and buy a giant energy company like Exxon Mobil Corp (XOM.N: Quote) or Chevron Corp (CVX.N: Quote) just yet. The uncertain dollar, the European Union and declining oil supplies will all likely affect oil prices in 2012. Oil plays in an uncertain world:

GLOBAL TENSIONS

The price of oil is notoriously hard to predict. Earthquakes, politics, and, increasingly, speculators can affect oil prices without notice.

That said, global tensions are likely to send the price of oil higher in the short term. It already near $100 a barrel, for a gain of almost $10 over seven days.

Iran's first vice-president warned on Tuesday that the flow of crude will be stopped from the crucial Strait of Hormuz in the Gulf if foreign sanctions are imposed on its oil exports. <ID: nL6E7NR19R> -- keeping the oil market on edge.

"Anything that happens that could lead to the closure of the (shipping lane) would be extremely bullish for oil," said Peter Beutel, president of Cameron Hanover, a consulting firm that focuses on energy risk management.   Continued...