Oil is the life blood of the world economy. The turmoil in Libya and throughout the Middle East is threatening the stability of the entire world. "Oil prices were in the danger zone and could rise further, if turmoil continued in the Middle East," Fatih Birol of the International Energy Agency said, according to Reuters. "Oil prices are a serious risk for the global economic recovery."

As of 8:30 EDT, Brent crude is trading at $106.66 per barrel, up 92 cents. West Texas Intermediate crude jumped $6.29 per barrel to $96.00. Keep in mind that while U.S. markets were closed Monday, oil traded higher across other world markets.

A batch of cold weather is spreading across Europe, pumping up demand for Brent crude. On the ICE exchange, January Brent traded at $90.69 per barrel, up $1.82, the Financial Times reported.

Brent crude -- the benchmark used by Europeans -- contracts are in 'backwardation,' the FT notes. Backwardation happens when the market quotes a lower price for a more distant delivery day. For example, January Brent is 4 cents higher than February and 10 cents higher than March. Backwardation usually means that there is strong immediate demand for the product.

The price of oil jumped 2.3% to close at $83.08 per barrel on Monday, The Wall Street Journal reported. The trigger was a report by the Department of Energy stating that Inventories fell to 1.13 billion barrels from a high of 1.44 billion barrels in September.

Since June, oil has been range-bound between $70 and $80 per barrel. Now, with inventories lower, there is a fundamental reason for oil to trade higher.

After a strong day yesterday for oil prices, the precious crude has had another strong showing today, rising $2.04 a barrel to $79.90, and was trading above the psychological $80 mark earlier in the day.

One of the main catalysts pushing oil prices higher today was a better than expected jobs report from the U.S. Labor Department that showed that first time jobless claims were lower than expected last week.

Early Wednesday morning, the American Petroleum Institute (API) reported that crude inventories dropped 2.4 million barrels during the past week. According to Platt's, inventories were expected to increase by 2.2 million barrels.

The report also showed that there was an increase in gasoline inventories, with distillates dropping. While the Energy Department is going to report its weekly supply data later Wednesday, crude futures inched higher above $76 per barrel.

Oil futures furthered their losses Wedsneday morning after data showed unexpected inventory gains during the past week. Late Tuesday, the American Petroleum Institute (API) announced that crude inventories increased by 3.69 million barrels and that gasoline inventories increased by 810,000 barrels. Expectations called for a decline of 1.5 million barrels in crude and 500,000 barrels in gasoline. This news caused a drop in crude futures, as concerns over heavy supply and weak demand started to surface.

I don't know if any one out there can say he or she saw yesterday's plunge coming. Was the plummet based solely on a fat-fingered typing mistake? Was it based solely on concerns over the health of the Greek economy? Was it caused by rumors that Germany may pull out of the eurozone? I don't know if we will be able to specify one problem, but one thing is sure in the wake of yesterday's drop -- fear is as prominent as ever on the Street.

On down days in the markets, one generally expects to see a rally in commodities, as they are often deemed a safe haven for investors. This wasn't the case yesterday as crude oil saw its three-day sell off extend itself to a 3.6% loss, bringing the closing price of black gold to $77.11 per barrel (crude is on pace to set its worst week since 2009).

Oil prices continued to rally today, with prices jumping $1.56 a barrel to $86.43.

Today's jump in oil prices is a reaction to positive news today that indicated the economic recovery could be stronger than anticipated.

Oil prices have been steadily rising, and today hit levels that we have not seen in 17 months for the precious crude.

A major reason why oil has been so strong lately is the weak U.S. dollar, which further weakened today in the wake of a worse than expected jobs report.

Oil prices traded lower Wednesday following an inventory report from the Department of Energy that showed a larger than expected increase in oil reserves last week.

Analysts had been expecting oil supplies to increase by roughly 1.9 million barrels, but were surprised to see the actual increase a much higher at 3.7 million barrels.

Following the unexpected rise in inventories, oil moved lower on the day and closed a bit under the psychological $80 barrier at $79.60. On Thursday oil prices crawled up to near $80 a barrel.

Oil prices moved above $60 a barrel earlier in the day, but where unable to maintain their gains and have since dropped below the psychological $60 barrier once again.

Earlier this year oil had been making steady gains as investors bet on an economic recovery occurring in the second half of this year, but we are now in the second half of the year and a recovery is nowhere in sight. As a result, traders have started to focus more on the underlying fundamentals for oil, and this has led to a pretty steep sell off over the past couple of weeks.

While I was not a finance major in college, I do know a few things about supply and demand. If there is ample supply and lower demand, prices should be low. If there is limited supply and high demand, prices should be high. I guess oil investors never really studied supply and demand economics.

Black gold is higher in European trading, as investors believe that the U.S. recession may have bottomed. Such a bottom could signal rising demand, which is enough for beleaguered black gold investors. In fact, Gerard Rigby from Fuel First Consulting in Sydney, Australia, noted, "The feeling is we've seen the worst of it, and the only way now is up . . . Some of this is also a trading momentum play."

For those that had the fortitude to pull the trigger, shorting crude back in early July when all the perfect storm conditions for $200 per barrel oil were on the horizon ... and had the stones to stay with that trade ... made a killing.

This is one of the greatest reversals for any major market of any kind that has ever occurred. And it clearly shows how the crude oil market was being manipulated by speculators and hedge funds.

The impact was fatal for hundreds of small airlines and small- to medium-sized trucking companies, along with thousands of other companies that didn't hedge against the price explosion in energy.

The price of crude, which topped out at $147 per barrel in July 2008, crashed to $35 per barrel by Dec. 18 -- a 76% haircut -- before getting a bid that got the price back above $40 on the eye-popping headline that OPEC would slash daily production by 4.2 million barrels.

This oil trade takes the cake.

At the zenith of the speculative bubble in the oil patch -- when crude hit $147 per barrel in July -- you had everyone from T. Boone Pickens to Prince Alaweed touting $200-per-barrel oil by the end of the year.

Crude is now trading around $40 -- down $107 per barrel in less than six months. Unbelievable!

And this latest drop comes after OPEC voted to cut daily production by an eye-popping 4.2 billion barrels per day.

Looks like the world is awash in crude oil.

Needless to say, those euphoric longs in the oil stocks got destroyed. Most energy stocks lost 50% to 70% of their value during the course of the sell-off in crude.

And remember those television commercials with T. Boone and Chesapeake Energy (NYSE: CHK) CEO Aubrey McClendon pushing for the expansion of natural gas?

Well, natural gas prices are down 60% from their mid-year highs.

If you put money into T. Boone's Clean Energy Fuels Corp. (NASDAQ: CLNE) as recently as September, when the stock was trading at $20, you now own Mr. Pickens' vision for $5.

Oil has gotten as low as $94 today. That is down from an all-time high of $147. Yesterday, crude sold down almost $10.

There is a case to be made that oil has much further to fall.

The first part of the argument is fairly simple. As the economy is crushed in the US and EU, demand for fuel and petrochemicals falls through the floor. Demand for China's exports also falls because consumers shut down their buying of everything but the essentials. China's need for crude drops as well.

Under those circumstances, if OPEC does not sharply decrease supply, oil will almost certainly move down by at least a modest amount.

But speculation may have just as great an effect. No one was able to fix a number on how much speculators helped drive crude prices up earlier this year. They had a role in it, and some government agencies and Congressional staffers think oil may not have ever moved above $120 without a push from those trying to make money on artificial price inflation.

Speculation cuts two ways. If those buying futures begin to gamble that oil will move down and if they begin to short crude, the downward push on oil could become significant.

Speculators may have done a lot to hurt the economy by pushing oil prices up. Now, perhaps they can do some good pushing prices down and make a ton of money in the process.

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