Peter F. Way, editor of Block Traders’ Oil & Gold Monitor, says crude prices have gone about as far as they can, but he finds two investments big traders and market makers like.

The curve of month-by-month crude oil settlement prices continues to hold the rising “contango” shape (when distant delivery prices for futures exceed spot prices—Editor) with a much flatter slope than earlier in the year. With the Julys settled at just under $70 [a barrel], some $10 above the Junes, the market has largely exhausted its recovery strength.

The change from a [few weeks] ago is that settlement prices for the important December 2009 contract have run up against the top edge of energy industry forecasts for that month We have regularly pointed out the striking differences in inferred forecasts between the June and December expiration contracts used more heavily by the energy industry, and all other expirations—the latter, apparently more influenced by speculators outside the industry. As front- and next-month contracts approach their expiration day, their expectations tend to move toward the nearest June or December contract’s forecast.

Thus we tend to regard the June and December outlooks as the more realistic economic judgments of what is likely and possible around those points in time. Right now, [the December 2009 contract] is starting to look a bit pricey. Some modest decline from here would not be surprising.

That makes oil patch stock investments in general less desirable than earlier in the year. Indeed, roughly three-quarters of our 2009 recommendations have come to their target prices, and beyond. Now, looking at the forecasts of the crude oil hedgers, and seeing the impact of less commodity strength behind the stock forecasts of the volume equity market makers, the current opportunities looking forward are far less and fewer than a few months ago.

The one major that has persistently appeared attractive to clients of the million-dollar market makers has been Canadian Natural Resources Ltd (NYSE: CNQ). It has the longer-term appeal of huge tar sands reserves, as long as crude remains above $40 a barrel, and great geographic advantage. Its double-digit typical stock price gains following forecasts like those at present are free of [likely] double-digit declines, an advantage enjoyed by few competitors. (It closed below $53 Monday—Editor.)

The only exchange traded fund (ETF) from the energy industry that currently offers any real attraction appears to be the United States Oil Fund (NYSEArca: USO), whose holdings are commodity contracts, rather than stocks. Its prospects, according to the million-dollar market-makers, [are] in line with the prevailing industry hedging conclusions for crude.

Over 180 previous instances of potentials as good as the present. [we] have seen double-digit gains three-quarters of the time, easily meeting our minimum investment hurdle. USO presents a better reward: risk tradeoff than 95% of our 2,000+ alternatives. (It closed below $39 Monday—Editor.)