After an uncertain first half of the year, oil stocks were one of the only investments to gush higher this year, and they still look to be the most profitable for the remainder of the year.

“I still think it’s the place to be in the back half of the year,” Jason Votruba, vice president and co-portfolio manager of the UMB Scout Small Cap Fund (UMBHX), told SmallCapInvestor.com. “I’m still very bullish on it.”

The fund manager dismissed the recent pullback in oil, calling it temporary. “If you use technical analysis you can look at the trend channel: we touched the top of the trend and now we’ve pulled back to that of 21-day moving average. I think we could go back to $120 perhaps, if that low, but I think we’re going see higher prices for a while.”

Votruba said that a major factor behind high oil prices for the foreseeable future is scaled-back oil production and burgeoning global demand for tightened supply. Mexico’s production, for example, has slipped 9.1% in the first four months of the year.

“You’ve got a lot of countries that nationalized their oil production; that leads to decreased production and now we’re paying the price,” Votruba said.

In addition to Mexico, Russia and Saudi Arabia have cut back production. China and India are also slurping up oil, as billions of both countries industrialize and new people begin driving automobiles. Government subsidies have also come into play, as gas in the Middle East, for example, goes for a very affordable $1 per gallon.

According to Votruba, there is currently less than 700,000 barrels of spare capacity in the market.

Aside from production, extracting oil takes time. Brazil has recently discovered oil off its coasts; however, there is still realistically five years until those reserves can be tapped. The United States possesses billions in oil as well; however, Congress has banned drilling such reserves.

“There’s plenty of oil out there. That’s not the issue,” Votruba said. “It’s just being able to get to it.”

In a hearing before the Committee on Homeland Security and Governmental Affairs on May 20, Michael Masters, managing member and portfolio manager of . . .

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