It is estimated that the demand for oil will probably rise by 1.8 to 2.0 MBPD (million barrels per day) this year. Along with that production will probably fall by more than that figure. With these two thoughts in mind, it seems that the only way oil prices will go are up.

The only question will be: How high will they go?

Here is a brief look at the earnings of two U.S. oil companies.

ConocoPhillips and Amerada Hess, two of the five largest U.S. oil companies, on Wednesday reported fourth-quarter profit that jumped more than 50 percent as growing demand and hurricanes lifted energy prices.

Net income at ConocoPhillips, the third-largest U.S. oil producer, rose to $3.68 billion, or $2.61 a share, from $2.43 billion a year earlier, the houston-based company said. Hess, based in New York and the fifth-largest U.S. oil company, said profit almost doubled to $452 million, or $4.31 a share.

ConocoPhillips's record profit of $13.5 billion for all of 2005 capped a year in which oil producers and refiners were the top performers in the Standard & Poor's 500 index. Hurricanes Katrina and Rita choked off oil and fuel supplies from the Gulf of Mexico, while economic growth raised petroleum demand in North America and Asia.

None of this is a temporary fluke for energy companies around the world. As an investor, I would only think of putting a small portion of my portfolio in this sector. While oil will go up consistently, it is still volatile and subject to forces not only related to the market. For example: terrorist attacks. Nonetheless, we should have a small portion invested in it.

Here are two ways you could do it. You could invest in BlackRock Global Energy and Resources Trust or a mutual fund such as Oppenheimer Real Asset Fund which is energy based. These are good conservative, solid plays which should yield some excellent results.

As autospectator reports, when you analyze oil markets, kept these three things in mind:

A) look to the past as a guide, B) use real-time pricing levels as a key barometer, or C) look to "forward fundamentals" as providing the best insight into oil markets? Long-time readers of This Week In Petroleum may have already guessed the answer: D) all of the above.

That's right! Do all three as you consider investing in the oil markets.