Monday, January 15, 2007

FRIGID BLAST AFFECTS OIL PRICES

The US is experiencing crippling cold weather. The arctic blast swept through the western US as far south as California and Las Vegas. The midwest has been hit with frigid cold and the storm moves eastward. This news could affect oil prices on tuesday.

Oil is up slightly since friday and should see a further increase from the weather as well as OPEC's grumbling again about how some members are cheating on quotas.

This weather induced enticement to buy oil stocks should be weighed against your investment goals in this sector. The oil sector has trended down since last summer and most institutional investor have shed a large portion of oil related stocks in their portfolio.

If your intention is to start adding oil to your portfolio with a contrarian motive while the prices are low and the mutual fund sell off continues, I offer this suggestion. Instead of buying big oil such such as Exxon (xom) or Chevron (cvx), which will retreat quickly after the weather eases, consider the Energy Select SPDR (xle) . This ETF includes Exxon, Chevron, other large integrated oil, as well as oil equipment and services.

Individual oil stocks and particular sectors of the oil industry can be risky during this point in time. XLE includes a broad base of oil related stocks and is some what buffered from large movements. It is an excellent way to increase your exposure in the oil arena, especially before the cold weather ramps them up a bit.

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