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With oil bouncing off new lows for the year, I am considering plays in crude oil or Oil & Gas production and exploration. I have several high quality Oil & Gas production stocks in my portfolio, all of which have taken significant hits this year. I am considering selling some of these positions to capture tax losses, and putting the proceeds into oil and gas ETF(s). Also possibly holding back and writing puts on one or more ETFs, possibilities being: DIG, XOP, OIL, OIH.

With oil dipping below $50, the question I am struggling with is what are the odds that prices below $50 are sustainable? It seems like we are seeing an extreme reaction to the bubble earlier in the year. Some factors that I can think of that might result in continued downward pressure on oil (in order of decreasing likelihood, in my opinion):

-Continued deterioration of world economies
-Permanent move away from large, gas guzzling, autos on the part of U.S. consumers, even with gas prices below $2
-Failure of U.S. auto industry
-Sustained and successful effort by the incoming Obama administration to decrease U.S. oil consumption and aggressively develop domestic, green alternatives like wind and solar.
-Dramatic foreign policy successes on the part of the incoming Obama administration, leading to (the perception of) significantly increased stability in oil producing regions of the world

My gut feeling is that we are in a highly unstable period, and will see large price swings as global events unfold, and that being on the right side of these swings could be enormously profitable. So how to increase the odds of being on the right side, and hedge positions?

I would be interested in other peoples thoughts about this:
What other factors would put downward pressure on oil and oil stocks?
What are the odds that oil will continue to fall from $50?
What are appropriate ETFs to invest in and appropriate hedging strategies?
Is the whole sector too fraught with risk and instability, and are there better places to be focusing limited bandwidth and investment resources?
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