Oil prices have continued to move higher today, with prices hitting a new record earlier today of $89.00 a barrel before cooling off slightly. Oil is now trading up $0.56 at $88.17.

We took a look at oil yesterday, and noted that the past few sessions' prices have been fueled by tension in the Middle East, and that is once again driving the market today. The recent turmoil between Turkey and the Kurds in northern Iraq have spurred concerns that any further escalation between the two would lead to supply disruptions from the area.

Earlier this week, the Turkish government asked the country's parliament for permission to enter into northern Iraq in pursuit of the Kurdish rebels. That request was approved today, and has set the stage for more violence in the region.

To me, it was inevitable that PetroChina ADR (NYSE: PTR) would become one the largest companies in the world, so I am not surprised by news that it has surpassed General Electric (NYSE: GE) to become the world's second largest company. It now stands behind only Exxon Mobile (NYSE: XOM), and has a much faster growth rate.

I have been shouting about this stock to anyone who would listen since I started writing for BloggingStocks, and hopefully a few have taken notice and earned some money with me. While GE has made some modest gains this year moving almost in lockstep with the indices, PetroChina is up almost 70% and has been paying a generous dividend the entire time. PTR reached a value of $434 billion riding the news of $85-a-barrel oil while GE is hanging tough around $413 billion on a down day in the market.

My original thesis when PTR was at $44 a share, paying about a 5.5% dividend yield and carrying a trailing P/E of 9.5, was that this stock was having a fire sale. Since that time, the stock has simply been on fire. I liked this stock because I felt that few things come close to the certainty of the sun rising in the morning, but the Chinese consuming more oil tomorrow than they did yesterday was one of them. The last time I recommended the stock, it was trading at $142.12 last December when I suggested investors add it to their watch lists for an opportunity to acquire it. That opportunity came as it dipped as low as $108.18.

China Petroleum & Chemical (NYSE: SNP), an energy and chemical company based in the People's Republic of China, is recently up $15.74 to $164.69. WTI Crude Futures are up 1.72% to $85.13 according to Bloomberg. SNP November option implied volatility of 88 is above its 26-week average of 38 according to Track Data, suggesting larger price risk.

CNOOC Ltd (NYSE: CEO) is up $8.24 to $185.50. As of 12/31/06, CEO owned net proved reserves of approximately 2.53 billion barrels of oil. Dow Jones reported CEO is still waiting for security regulators to change its listing regulations so that the company can sell A shares on Shanghai, allowing Chinese investors to purchase CEO stock. CEO November call option implied volatility of 69 is above its 26-week average of 31 according to Track Data, suggesting larger risk.

Daily options update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Exxon Mobil Corp. (NYSE: XOM) shares are trading higher today as the oil sector is getting a boost today from PetroChina (NYSE: PTR), which is up over 11% so far this morning after news of increased production and possible major new discoveries. PTR's market value is now up to $430 billion, catapulting the company ahead of General Electric (NYSE: GE) and just behind XOM as the world's most highly valued public company. Crude oil futures are also on the rise today, hitting record highs again as concerns rise that Turkey may invade northern Iraq. If you think that XOM won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on the company.

XOM has been charging hard over the past two months, hitting a new one-year high of $95.07 last week. It opened this morning at $94.15. So far today the stock has hit a low of $94.15 and a high of $95.00. As of 10:55, XOM is trading at $94.64, up $1.16 (1.2%). The chart for XOM looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $75 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just 3 months as long as XMSR is above $75 at January expiration. Exxon would have to fall by more than 20% before we would start to lose money.

According to a report in Bloomberg, oil is selling in record territory on worries that Turkey may invade Northern Iraq. Uncertainty is never a good thing when it comes to business, and when it's related to oil prices it rocks the world, and potentially the world's economy.

• Turkish Prime Minister Tayyip Erdogan told reporters his country would pursue the Kurdistan Workers Party, or PKK, regardless of diplomatic costs, according to an Agence France-Presse report. Northern Iraq holds some of its largest oil fields, including Kirkuk, the source of much of Iraq's exports.
• "If they start shelling across the border, the price is going to go up,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. "When there is tension in the world, oil gets bid up.''

This unpredictability in the region has kept oil prices up even though demand is not as strong as speculators anticipated during its rise over the last few years. For me, this is an unfortunate irony as I read this news after returning from a breakfast meeting where I told an associate, "Oil will be $60 a barrel before it is $100, unless war breaks out somewhere." This is very sad to me, because just the possibilty of war creates a rise in oil prices that I envision causes more pain for those at the bottom of the economic strata barely getting by now.

TheStreet.com's Jim Cramer says that as oil goes higher, these stocks will have even more room to run.

Name me three tech stocks that have increased more than 100% in the last year that are still cheap.

Try it! Think you can't?

I have some news for you. I have three that are still selling well under twice their growth rate that have more room to run and simply aren't done, as crazy as that seems: Oceaneering International Inc. (NYSE: OII) (Cramer's Take), FMC Technologies (NYSE: FTI) (Cramer's Take) and Core Labs (NYSE: CLB) (Cramer's Take).

I know. These are oil companies. They are not semis or software or hardware. They are technical services companies that allow companies to recoup marginal oil.

They are the ultimate tech plays on $80 oil. They are worth their weight in black gold.

Office Depot, Inc. (NYSE: ODP) had 1,186 retail stores in North America and another 369 stores owned, licensed or franchised in other parts of the world as of June 30th.

Smith Barney says "shares of ODP appear undervalued but few data points loom in the next quarter or two to drive them higher." ODP is expected to report earnings per share (EPS) in late October. ODP January option implied volatility of 43 is above its 26-week average of 33 according to Track Data, suggesting larger price fluctuations.

Baker Hughes Incorporated (NYSE: BHI) is engaged in the oilfield service sector. BHI recently up $1.01 to $92.12.

BHI has a market cap of $29.5 billion with long term debt of $1 billion. BHI is expected to report EPS on October 26th. BHI reported on October 8th its September rig count rose to 1,032 from 1,009 in August 2007. BHI November 95 calls have traded 59 times on contract volume 2,878 contracts, above its open interest of 834 contracts. BHI November 100 calls have traded 170 times on contract volume 18,641 contracts above its open interest of 480 contracts. BHI November option implied volatility of 34 is near its 26-week average of 30 according to Track Data, suggesting slightly larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

FedEx Corporation (NYSE: FDX) shares are trading higher today as the stock appears to have found some support around $105 recently. Investors are buying back into FDX for a variety of reasons: possibly because the stock looks cheap compared to historical prices, possibly because oil prices took a big drop yesterday, and possibly due to economic optimism spurred by the start of earnings season and some M&A activity that could signal a reprieve from the credit crunch. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on FDX.

After hitting a one-year high of $121.42 in February, the stock slipped to a one-year low of $99.30 in August. FDX opened this morning at $106.27. So far today the stock has hit a low of $106.27 and a high of $107.70. As of 10:50, FDX is trading at $107.10, up $1.00 (0.9%). The chart for FDX looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $90 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 4 months as long as FDX is above $90 at January expiration. FedEx would have to fall by more than 16% before we would start to lose money.

FDX hasn't been below $99 at all in the past year and has shown support around $104 recently. This trade could be risky if oil prices soar again, but even if that happens, this position could be protected by strong support between $104 and $106, where the stock bottomed out a few times in the past year.

Brent Archer is an options analyst and writer at Investors Observer.

Despite plunging crude oil futures, Valero Energy Corp. (NYSE: VLO) shares are trading higher today after Citigroup upgraded VLO from hold to buy. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on VLO.

After hitting a one-year high of $78.68 in July, the stock dropped sharply and has been trading mostly in the upper $60's over the past three months. VLO opened this morning at $68.85. So far today the stock has hit a low of $68.81 and a high of $71.90. As of 11:30, VLO is trading at $70.44, up $2.09 (3.1%). The chart for VLO looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 6 weeks as long as VLO is above $60 at November expiration. Valero would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.

VLO hasn't been below $60 since March and has shown support around $68 recently. This trade could be risky if oil prices relax over the next few months, but even if that happens, this position could be protected by strong support between $60 and $65, where the stock bottomed out in August.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in VLO.

Pioneer Natural Resources Co. (NYSE: PXD) is poised to be the first independent operator to produce oil on the North Slope, an area dominated by the major producers such as Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP), though other independents such as Andarko Petroleum (NYSE: APC) may not be far behind.

Ten-year-old Pioneer, based in Irvine, Texas, plans to begin drilling in a few weeks off the coast of Oooguruk Island, Alaska, in a field expected to yield as much as 90 million barrels of oil. Pioneer expects to begin producing oil from there in the first half of next year.

Pioneer's efforts are being closely watched to see whether independents can establish themselves on the North Slope. "Ours is a bellwether project," says Chief Operating Officer Tim Dove. "If we do well, make the project work in reasonable time and in a fiscally responsible manner, it could open up some avenues for us and other independents."

Pioneer also announced the start-up of its South Coast Gas (SCG) project, expected to produce approximately 50 million cubic feet of natural gas per day by the end of the year. Scott Sheffield, Pioneer's Chairman and CEO, says, "With the completion of SCG and considering that a majority of the capital costs related to our Oooguruk development on the North Slope will be invested by the end of 2007, we expect our 2008 drilling and development budget to decrease significantly as compared to 2007."

The share price has been rising since reaching a 52-week low of $35.51 in August after Pioneer's second quarter report. The share price at close on Friday was $46.02. Pioneer will report on its third quarter on November 6.

Got gold? In this edition of StockWatch: Between the Bells, Thomas Winmill of the Midas Funds outlines his strategy for broadening your portfolio with investments in precious metals and foreign energy concerns.

Echoing the sentiments of recent StockWatch contributors, Tom says we're currently in a bull market, and can expect growth to continue, thanks in part to recently lowered interest rates.

Tom recommends investors check into foreign equities -- he favors overseas energy companies like Hong Kong's CNOOC (NYSE: CEO), and EnCana Corporation (NYSE: ECA) of Canada. CNOOC manages China's offshore oil and gas exploration, and currently traded in the $160s, gushing up from around $100 in mid-August. EnCana is one of North America's largest oil and gas distributors, and trades about $20 higher than at the start of 2007.

Tom also urges investors to look beyond stocks and bonds, and suggests devoting between five and ten percent of your portfolio to gold and other precious metals.

If you enjoyed this clip, check out recent StockWatch interviews with MSN Money host and author Timothy Sykes and AOL Money Coach Hilary Kramer.

Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.

After hitting a one-year high of $52.40 in January, the stock dipped to a one-year low of $26.21 in August. CAL opened this morning at $35.30. So far today the stock has hit a low of $35.25 and a high of $36.98. As of 10:50, CAL is trading at $36.30, up $0.85 (2.4%). The chart for CAL looks neutral and deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 11 weeks as long as CAL is above $25 at December expiration. Continental would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

Today, oil prices have continued yesterday's sell off, falling $1.13 down to $79.11 as more profit taking is hitting the market.

Today's selling comes after prices dropped by $1.42 yesterday as traders seem to believe current market prices are unjustified based on current fundamentals. After the steep run up in prices last month, we should not be too surprised to see prices retreating a bit, but I would urge you not to read too much into the past couple of days of trading. It would be unwise at this point to assume prices will head too much further down over the next few weeks.

We will get a good indication of just where the market wants to head tomorrow when weekly inventory data is reported. Based on the recent trend, I would not be surprised at all to see inventories have fallen more than expected last week. Analysts are expecting to see a draw of 400,000 barrels last week, and if we see any additional declines, prices are going to be back over $80 a barrel fast.

Barron's piece on AMR Corporation's (NYSE: AMR) American Airlines points to how investor sentiment might be changing toward the airline industry. The airlines are profitable, have huge cash positions and little debt outside of the leases for their planes.

One potential catalyst could be the spinning off of many of the industry's frequent flyer programs, similar to what Air Canada did with its Aviation Holdings frequent flyer program.

Also, as American Airlines and UAL Corporation (NASDAQ: UAUA) are getting pitched by investment bankers about spinning off assets, the supply-and-demand balance for oil and jet fuel are looking more favorable for a price decline. With demand slowing and new supplies coming to market from Saudi Arabia, the drop in fuel could be considerable.

With American having corrected from $40 and now selling for $22, and UAL Corp holding up better, but still selling for a cheap valuation, both stocks seem to have a number of catalysts in place to drive both airline stocks higher.

Oil traded above $81 today again. Some analysts believed that the price would fall as reports hit the market saying the supply was greater than expected. But the drop in price lasted only a few days.

One reason for the spike up is a storm in the Gulf of Mexico. CNN Money writes, "a tropical depression near Mexico raised concerns about possible disruptions to oil and gas production there."

To a large extent, that misses the point. Oil moves higher at the slightest provocation. Bad political news from Venezuela. Civil war in Nigeria. Trouble in the Middle East. Concerns that OPEC won't raise production.

There is now a vocal minority of analysts who believe that all of these factors and increasing consumption in the US and China will drive oil as high as $100. So the dancing around $80 is only a pause on the way to a much higher number. As The Houston Chronicle pointed out, "demand is strong, supply is tight, and access to resources is restricted, leaving little room for disruption." The paper added that oil inventories are expected to tighten despite the Organization of the Petroleum Exporting Countries' decision last week to increase production by 500,000 barrels a day in November.

And that is at the heart of it, the twin pressures of disruption and demand. All things being equal, oil is going higher.

Douglas A. McIntyre is a partner at 24/7 Wall St.