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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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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I spent the weekend at the Washington D.C., Money show. The show has shrunk from last year, and the opinions ranged from "this is an incredible time to buy" to "Aaaaaaiiiiiii!!!!!" I'll have more about that in Wednesday's Money and Markets column.This morning, the market is rising on news of a $586 stimulus plan in China and a new A.I.G. bailout in Washington. I'm not sure why the market thinks this is good news. Last time I looked, the Federal Debt had soared to such levels that each American now owes over $32,000. I think that's unsustainable, as long as the US dollar holds its present value.In other words, it would be a lot easier to bear if that debt was only (in relative terms) $3,200. That's not so scary, is it? I wonder if Uncle Sam is thinking the same thing. The Russians

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When people ask me if I think crude oil is going to $50 or $150, I nod sagely and say: “Yes, probably.” I’m not being flip. I’m simply giving both the short-term and the long-term timeframes. Short-term, crude oil is probably heading lower, even though it’s nearly 60% off its highs. The last chance to hold the line on oil prices was at OPEC’s emergency meeting. And the oil cartel choked like a cat on a hairball. They cut 1.5 million barrels per day of production when they needed to cut about 3 million barrels per day. The OPEC meeting was the last obstacle in the way of deflationary forces that are driving oil prices lower in the short-term. Long-term, there are forces that should drive oil much higher. And one of ...

Hedge Funds & Investment BanksHedge Funds | The New Investment BanksAre hedge funds the new investment banks? I think so. They will not take over all investment banking activities or all traditional banking activities but they are taking away market share from the investment banks within many arenas including private lending. I've seen a large increase of inquiries coming to me through my site from commercial real estate, patent portfolio, land development and private corporations seeking capital from hedge funds because they can no longer access it through their regular bank sources. Here is an article excerpt on this topic:An unprecedented cash crunch is choking the ability of banks to lend and creating an opportunity for hedge funds to launch, or ramp up corporate lending facilities, Reuters reports.Companies that have relied on bank ...

Crude oil is now worth less than half its July value. But as central banks and consumers rejoice, socialist oil-exporters like Russia and Venezuela are in “dire straits”. Justice Litle says desperate times could prompt desperate measures from the firebrand leaders of these countries. And this “geopolitical time bomb” could send crude skyrocketing once again.

This from Taipan Daily:

The petrocrats were richly rewarded as crude oil climbed to new heights. Now a sharp decline in the price of oil threatens to tear their world apart. A time for drastic action could be at hand…

Today I want to talk about a situation that feels like a ticking time bomb - a time bomb that could go off sooner rather than later. It starts with this chart…

After climbing to nearly $150 a barrel earlier this year, the price of

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Did you know that the Indian government imposes a cess on indigenously produced crude oil? The Oil Industry Development Act, 1974 based on which the cess is being charged, states that “the cess collected under this provision would be made available to the development of petroleum sector”. The cess was introduced to provide financial assistance to state-owned oil companies, and is not applicable to private oil producers.

Since then, the government has collected Rs.74972.36 crore as cess, but only Rs.902

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By Martin Hutchinson Contributing Editor With sky-high growth potential, China and India are the two markets no investor can afford to miss out on. But that doesn’t mean they’re impervious to market turbulence, and in times of trouble, India is the more reliable investment. No doubt, both countries’ markets are suffering this year, with China’s Shanghai A Index down 50%, and India’s Sensex Index down 25%.  It’s no secret that India is struggling with both a growing budget deficit and mounting inflationary pressure. But China has problems too – it’s just hiding them under the carpet until the Olympics are over. That’s why, for me at least, the investment decision is clear – I’ll buy the country whose problems are out in the open and already reflected in stock prices. China’s Pending Credit Crunch China’s inflation has been quiescent recently. It declined from 8.7% ...