Montreal, Canada

Probably one of the most influential investment houses in the world, Goldman Sachs (NYSE-GS) can move the markets. The sharpest trading minds and the most expensive salaries on Wall Street are paid at Goldman Sachs. I’d also postulate that some of the biggest liars and thieves work at this bank and were in many ways responsible for exacerbating the crash in mortgage-backed securities in 2008.

Back in early April, the bank (converted into a bank from investment bank during the financial crisis in late 2008) downgraded commodities, sending markets sharply lower on that day. Indeed, commodities had surged from the market lows last July without suffering a correction and were heavily over-bought. That call was right on the money.

Roll the clock forward almost seven weeks later and Goldman is bullish again.

Goldman Sachs now forecasts $130 a barrel Brent crude from now until May 2012, or a 14% advance. Oil inventories are drawing down this spring and OPEC is unlikely to boost output. That spells a tighter market over the next several months and beyond as hard-to-find oil becomes a hot commodity again.

China, which has hiked lending rates four times since last October, is likely to continue increasing its commodities consumption after a period of stockpiling earlier this winter. Copper inventories are now being reduced along with zinc. China’s oil consumption continues to rise.

Oil prices are heading higher. The problem for the individual investor is how to ride that prediction if they don’t own oil futures contracts. For most retail investors, rolling over futures contracts is too speculative and in some cases, expensive.

ETFs in the crude oil space offer poor correlations, high fees and should be avoided (e.g. USO).

Instead, I like Canadian oil companies and U.S. and Norwegian deepwater oil services companies.

Margins for the latter are rising rapidly over the last 12 months as more companies switch drilling rig activity from natural gas to oil. The number of land rigs in the United States drilling for natural gas is down 8% from a year ago while oil-rigs are up 81%, according to Baker Hughes (NYSE-BHI). High oil means big bucks for drillers.

Colombian oil companies are also a good investment. The country is undergoing a major overhaul as it pertains to foreign direct investment and has lured some serious money from the likes of Carlos Slim, the world’s richest entrepreneur. Leaders in this area include Petrominerales (Toronto-PMG) and Pacific Rubiales Energy (Toronto-PRE).