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.

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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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