Oil Drop An Excellent Buying Opportunity

Oil has been making a lot of headlines lately. It's precipitous fall from $147 to $108 has been tagged as a big reason for the rally we have seen from lows in the Dow of under 11,000 (although lately the market has been trading in a bounded range). It should be noted that the decline has been slowing of late (except a big drop after Hurricane Gustav failed to inflict heavy damage on oil infrastructure). I posted earlier that I didn't expect oil to drop far below $110, and am pretty much sticking to that thesis, although will concede that it will probably drop to the $100 per barrel range. It was clear to me that oil's astronomical rise in the first half of this year was unsustainable and was simple speculation (bearish news for oil elicited bullish reactions, an indication to me of price manipulation). Regardless, I do feel that despite any demand destruction we may have seen in the Western countries, the developing countries will continue to increase demand, resulting in consistently higher prices for the next period of years.

I feel that this drop in prices is an excellent opportunity to buy oil companies. My personal favorites are Transocean (RIG) and Petrobrasilias (PBR), with PBR being my number one long term pick right now. They are sitting on an estimated 50B barrels, but it is in deep water, so you need to believe that future prices will be high in order for their stock to really move.