Is Oil Ready to Skyrocket?

by Jason Simpkins Associate Editor, Money Morning

Editor’s Note: Oil has been in the news a lot recently, from its roller-coaster movements, to the international issues. Russia and Israel are both helping OPEC bring prices back up. And if 2008 is any indication, oil might be ready for another climb. Our colleagues over at Money Morning think that might only be the tip of the iceberg.

Oil Prices Could be Ready to Rally if History is Any Indication

Last year’s 54% drop in oil prices may have set the table for a rally similar to the one experienced in 1999, when prices doubled after a similar decline.

The so-called “forward curve of futures contracts” traded on the New York Mercantile Exchange suggests prices will rise 28% this year, according to Bloomberg News.

The current curve looks almost the same as it did 10 years ago, when Russia’s

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Last year’s 54% drop in oil prices may have set the table for a rally similar to the one experienced in 1999, when prices doubled after a similar decline. The so-called “forward curve of futures contracts” traded on the New York Mercantile Exchange suggests prices will rise 28% this year, according to Bloomberg News.

The current curve looks almost the same as it did 10 years ago, when Russia’s default drove oil prices to drop as low as $10.82 a barrel in late December 1998 - a decline of nearly 40% from where they began that year.

At that time, the Organization of Petroleum Exporting Countries (OPEC) responded by cutting output by 1.71 million barrels per day (bpd), an amount equal to 7% of the group’s total supply, setting the stage for a 1999 rally in which prices more than doubled.

Fast forward to the present.

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Oil price volatility is on the rise again. Turmoil in Gaza, combined with output cuts by OPEC and the Russia and Ukraine added dispute is also driving oil prices up. Economic data, at the same time, continues to deteriorate and drive prices down. This all adds to volatility. Today, oil fell 8% since to US$46.58/bbl. br /br /Crude inventories are at an eight-month high. Looks like the upside is limited.

Emerging Market Funds Lose $48 Billion; Bank of America Sells China Bank Shares; Family Dollar Beats and Raises Forecasts; New CEO, Cost-Cutting at Orbitz; Russian Winter; Monsanto Reaps Profit; No Pain Means Gain for Sun; Oil Slides 12%

More than $48 billion was withdrawn from emerging market funds in 2008, with the largest chucks of change pulled from funds tracking Asia, according to EPFR Global. An emerging markets bellwether, the MSCI Emerging Markets Index, dropped 54% last year, its worst performance since it was created in 1987, Bloomberg reported. Bank of America Corp. (BAC) sold 5.62 billion of its China Construction Bank Corp. shares, raising $2.83 billion. Based on the Construction Bank’s IPO price, Bank of America realized a profit of about $1.13 billion, Reuters reported. Bargain retailer ...

The breakdown of international trade is key threat to the global economy in 2009, says Chris Mayer. Several countries have already taken action to protect domestic industries, including the US with its auto bailout. If this trend continues, Chris says the global downturn could become even deeper than imagined.This from The Daily Reckoning:

Where trade flourishes, business is good. But trade does not always flourish. The linked forces of globalization move in fits and starts.

The authors of Power and Plenty, a new book on trade over the last thousand years, tell us as much. “If anything,” they write, “history suggests that globalization is a fragile and easily reversible process.”

One of the looming threats in 2009 is the reversal in trade flows and increasing barriers to trade.

For the first time since 1982, The World Bank predicts global trade volumes will shrink in 2009. Undoubtedly, global trade

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When I finally fired off yesterday’s commentary (to my editor) in the wee hours of Tuesday morning, I must admit that I wasn’t overly optimistic about what I would find when I turned my computer on after a few hours of shut-eye. I was expecting the worst…but got something entirely different.

Gold bounced off its lows of Tuesday a couple of times during London trading, but starting at lunchtime in London, and continuing right until the London close at 3:00 p.m. (10:00 a.m. in N.Y.)…gold managed to inch its way higher. Once London was done for the day, it wasn’t too long before the gold price made a spirited rally on the Comex in New York, and turned what could have been a very ugly day into a surprise to the upside.

Silver put in an even more powerful rally…with the bottom being in at 9:00 a.m. in London trading…and from there

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Geo-political tensions are mounting in the global energy game. And that could make investing in oil right now the trade of the year, says Manraaj Singh. Buying shares of oil majors is a good move now. But Manraaj says quality mid-sized oil companies are best placed to return big profits in the next oil bull run.

This from Fleet Street Invest:

Israeli tanks have just rolled into Gaza…Almost three thousand miles away, Nigerian separatist blew-up an oil pipeline over the weekend…Meanwhile, Russia is locked in a dispute over the price of gas with Ukraine. Today they stopped deliveries of natural gas to Ukraine, Turkey and Europe to force the Ukrainians to pay up…

While fears about political instability drive the price of oil back up again, the OPEC oil barons are tightening the screws on global oil supplies…Oil was trading at just $35 per barrel on Christmas Eve. It’s over $50 this

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This market is so wild, so volatile, that I’m calling it the “Andy Warhol market” — everyone gets a turn to be right, but only for 15 minutes at a time! And right now, there are massive forces lined up that could thrust stocks and commodities to the moon … and an equally formidable array of triggers that could send them tumbling lower. The stocks I’ll leave to others … But let me show you the forces that are pushing around gold and oil. Plus I’ll give you four ways to play these wild swings. Gold-ilocks and The 3 Bears I’m generally bullish on gold, so it’s good to acknowledge the bearish forces as well. While total gold demand rose 18% in the third quarter, the fourth quarter was when ...

strongFinancial News/strongbr /br /Jason Corcoran br /br /emLetter from Moscow - January 4, 2009/embr /br /Letters to Father Frost, the Russian equivalent of Santa Claus, have been stacking up well ahead of the Orthodox Christmas Day on January 7.br /br /This year, the postal service in Moscow’s Kuzminki district reported an unusually high level of correspondence from adults who wish for a new job or help with meeting credit payments.br /br /However, grown-ups looking for personal bailouts may be better served popping a letter in the mail to Vnesheconombank, the state development bank, which has come to prominence during the financial crisis as the Kremlin’s main piggy bank.br /br /VEB, which traces its genesis back to the October 1917 revolution, was originally responsible for managing Soviet-era debt. It was transformed two years ago into a development agency to spearhead efforts to diversify Russia’s economy but has only recently come to ...

Dollar touches fresh 3-week high versus the euro…  ETF Securities reports 2 pct rise in gold ETF holdings… Platinum, palladium rise to multi-week highs…

Gold fell more than 2 percent on Tuesday as a stronger dollar dented the precious metal’s appeal as a currency hedge, but the platinum group metals rallied as investors hunted for bargains.

Spot gold was quoted at $846.50/848.10 an ounce at 1444 GMT, down from $858.90 late in New York on Monday. However, it lifted off an earlier low of $838.55 as the dollar trimmed gains against the euro after a raft of U.S. data at 1500 GMT.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $10.10 at $847.70.

VM Group analyst Matthew Turner said investors were looking to the currency markets for direction. “A lot of news on physical

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