BofA: Oil Could Hit $160

Bank of America today said that oil could hit $160 a barrel. The May ’11 front month contract for Brent crude closed at $122.88 today, April 13, 2011.

If all indicators point to oil prices going higher, with a floor of $125 this summer, a possible spike past $140, a 30% chance of hitting $160, and a yearly trend of always rising in the summer, isn’t this a buy signal? Everyone in the world has been long oil anyways, right? This is just the confirming analysis.


We are going long oil, any oil stock, futures, or ETF such as the 2x leveraged ProShares UCO (closed at $57.24.)

We will exit when we win or lose 20% on UCO (10% for any non-leveraged trade), or we hit Labor Day 2011.  We believe odds are about 60% of winning, possible profit larger than loss.

Here is a chart of the seasonal increase in oil, typically bottoming in March and increasing through the end of summer:

Here is the CNBC quote on the Bank of America analysis:

“Commodity prices should move broadly higher in 2011 on robust economic growth in emerging markets, despite relatively weaker growth in developed markets,” said Sabine Schels, a commodity strategist at BoA Merrill Lynch in London in a research note.

“With oil demand expanding rapidly and Libya production down by at least 1 million barrels per day, we forecast (the) Brent crude oil price to average 122 dollars a barrel in the second quarter, and believe prices could briefly break through 140 dollars in the next 3 months,” she said.

Given the risks from the situation in the Middle-East and North Africa, Schels says there is a chance the price could go even higher over the next 2 months.

“Under our upside risk scenario, Brent prices could average this year between 125 dollars a barrel and 160 dollars a barrel,” Schels said.

Disclaimer: These are my own personal trading strategies documented here as a diary of my analysis methodology. This is in no way an offer, solicitation, or recommendation to buy or sell securities. I am not an investment advisor and any trades you make are 100% at your own risk.

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