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Oil Curve Steeper Than '99 Shows Possible Gain in '09 (Update1)
Jan. 5 (Bloomberg) -- The steepest plunge in crude prices on record may be setting up oil investors for a rally this year, if history is any guide.
The so-called forward curve of futures contracts traded on the New York Mercantile Exchange suggests oil will rise 28 percent to $60.10 a barrel by December. The curve looks almost the same as 10 years ago, ....
Bets on a recovery paid off then as the Organization of Petroleum Exporting Countries cut production 6.9 percent, causing prices to more than double in 1999. Now, OPEC is pledging to reduce supply 9 percent,

“The world economy will get into a more stable environment most probably in the second half of next year,” Christoph Eibl, who helps manage more than $1 billion at Tiberius Asset Management AG in Zug, Switzerland, said Dec. 31. “Commodities are thus due for a rebound. Crude oil has the best potential.”
“While commodity prices have fallen sharply from their July 2008 peaks, I see a further 15 to 20 percent downside risk for commodities into 2009 and maybe a recovery of those prices only toward the end of the year if there are signals of a global economic recovery,” said New York University Professor Nouriel Roubini, who predicted the global financial crisis.

OPEC is “determined to bring stability to the oil market,” Saudi Oil Minister Ali al-Naimi said Dec. 21 in London, and Saudi Arabia’s King Abdullah said in November that $75 was a fair price. That month his nation cut output by 3.2 percent, the most since April 2006, data compiled by Bloomberg show.
OPEC will reduce daily crude shipments by 1 percent in the four weeks to Jan. 17 as the group enacts the supply cuts it agreed in Algeria last month, according to industry consultant Oil Movements.

The Federal Reserve cut its benchmark interest rate to as low as zero for the first time and the incoming administration of President-elect Barack Obama will seek as much as $850 billion in new spending and programs, congressional officials have said. China unveiled a 4 trillion-yuan ($585 billion) economic stimulus plan in November and European Union leaders are drawing up packages worth about a combined 200 billion euros ($278 billion).

“Once these economies kick in again with the money supply pouring into these economies, everybody is going to be caught short with no inventory of these commodities and then commodity prices will move up again,” said Mark Mobius, executive chairman of Templeton Asset Management Ltd. in Singapore, who oversees about $26 billion in emerging-market stocks.

“Low prices in themselves do not normally create demand for commodities but for oil they do,” said Tim Mercer, chief investment manager at Hong Kong-based hedge fund Musahi Capital Ltd. Should the economy recover this year, “$80 to $100 oil is quite possible,” he said.

World Consumption
World oil consumption will increase by 400,000 barrels a day, or 0.5 percent, to 86.3 million a day this year, according to the Paris-based International Energy Agency. Oil demand in 2008 fell for the first time since 1983, the IEA estimated.
“The dollar is going down,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “If that’s right, gold is definitely going to continue its recent recovery and I think that might give some support to oil prices as well, despite the weak fundamentals.”