DryShips Inc. (DRYS) is on the move after the company announced that its offshore unit scored a four-well drilling contract valued at roughly $135 million. Under the terms of the deal, DryShips will commence drilling in West Africa in the first or second quarter of 2011 for a period of approximately 300 days.

The positive news propelled DRYS substantially higher right out of the gate, with the shares staging a bullish gap above short-term resistance in the $4.50 region. Going forward, this area could now switch roles to act as a technical backstop for the shares.

Schlumberger Ltd (SLB), first written about on May 6, 2009 at a price of $56.09, has taken it on the chin in the past six months. Most of the slide stems from uncertainty regarding the status of U.S. deepwater offshore drilling following the massive Deepwater Horizen oil spill in the Gulf of Mexico this summer, and the consequent moratorium on deepwater drilling (note: The moratorium is scheduled to be lifted November 30, 2010.)

To be sure, global demand for oil and natural gas will increase in the years ahead, and so will demand for deepwater expertise, but the question market regarding the U.S. market represents too much risk, even given Schlumberger's substantial international business.

Goldman Sachs Group, Inc. (GS) is recently trading at $148.97 in after hours trading, above its close of $145.22. The SEC is expected to make a significant announcement today today concerning GS. GS is expected to announce Q2 EPS on July 20. GS total option volume today was 200K contracts. August put option implied volatility is at 39, October is at 38; near its six-month average of 37, according to Track Data, suggesting non-directional price movement

BP plc (BP) rallied 9% to $39.44 after saying oil flow stopped as part of the well integrity test. BP call option volume of 226K contracts compares to put volume of 144K. BP August put option implied volatility is at 59, below a level of 68 from July 15 according to Track Data, suggesting less risk.

Update is by Stock Specialist Paul Foster of theflyonthewall.com

The price of oil could moderate in the year ahead, if U.S. and global GDP growth comes in below forecasts. Otherwise, there's a better than 50/50 chance oil arcs toward $100 -- again -- and that's a big reason I'm reiterating my buy rating for Oceaneering International (OII), first recommended on April 7, 2009 at a price of $38.01. If you bought OII in April 2009, you're up about 50%.

To be sure, renewable energy source use is on the rise, but breakthrough energy form discovery aside, oil will continue to be the world's most important commodity for at least 15-20 years, and probably for longer than that. And that bodes well for drillers and oil service companies like OII.

What is already known is that OPEC will almost certainly cut production at its December meeting. It has several members with faltering economies, particularly Venezuela and Iran. Even countries like Saudi Arabia would like to begin to see the profits that $70 oil were bringing in.

Rumors are that a production cut could hit two million barrels a day. With demand falling in large economies like the US and China, will that be enough? No one knows, but it is a good bet that if this reduction does not do the trick, there will be another one.

Oil may be pushed down by a second important factor. With prices low, the investment in drilling is dropping sharply, which means that, in the near future, supply will take another hit. According to The Wall Street Journal, "As oil and gas prices fall, drilling activity in the U.S. is slowing more than expected, battering shares of drilling companies, hurting economies in energy-producing states and sowing the seeds for supply shortages when the economy recovers."

It would probably be safe to guess that what it happening in the US is also working its way through drilling operations in other large countries. Oil consumers would have to be especially concerned if this is happening in non-OPEC states like Russia, Mexico and Canada where low oil prices are combining with a deep recession to cut capital expenditures on oil exploration.

The price of oil is going up, and if drilling continues to slow, it may stay up for a long time.

Douglas A. McIntyre is an editor at 247wallst.com.

I read a quote in an article recently which stated, "What Wall Street is about is smart guys thinking about ways to make money from dumb ones." That quote is attributed to one John E. Fitzgibbon, the publisher of an online newsletter, in an article from Eric Dash via The New York Times. While Mr. Fitzgibbon's remark might validate special investing skill on the part of some smart and timely investors, I take exception to the notion that all those investors who lost money in the markets over the past year are the dumb ones.

The question now is, where is the smart money headed?