Oil started and finished 2006 at roughly the same place... $60 a barrel. But the year in between was far from boring.

As we started off the 2006 year things could not have looked better for the oil industry. Prices were sky-rocketing and by the middle of the year we were looking at all time highs for the precious crude. However, the latter half of 2006 proved to be tougher times on oil and we have since seen a pretty harsh pullback.

Prices hit a peak of around $80 a barrel late in the summer as questions loomed about a harsh upcoming hurricane season and the markets were spooked about rising geo-political unrest. While the ongoing conflict between the United States and Iraq are enough to create some serious doubts about the stability of the Middle East, we also saw a massive military conflict between Israel and the militant group Hezbollah in Lebanon in June and July. At the end of July prices were soaring into the upper $70's all we were hearing was about $100 oil and how fast we would get there.

What a difference a couple of months have made. The Israeli / Lebanon conflict fizzled out and a non-existent hurricane season has come and gone. We are now looking at oil priced around $60 and in danger of heading down to the mid $50's towards the beginning of 2007.

After a 2005 seasont that produced hurricane devastation that the country has never seen before, 2006 came in with a remarkably calm hurricane season. While most weather forecasters had predicted an unusually strong hurricane season, what we saw was a season where no hurricanes at all hit the American coast. This was a welcome sigh of relief for a country that is still trying to deal with and overcome 2005's devastating season, but for the oil investors out there it was just another reason to sit back and watch your oil investments continue to fall.

With the geo-political arena cooling off, and no hurricanes hitting the coast, prices plummetted down about $25 a barrel between August and October pushing once record high prices down to the mid to upper $50's. While this is still very high for oil, it was enough of a drop to catch OPEC's attention and rumors started to swirl about the oil cartel instituting some uniform cuts to their daily output.

OPEC decided back in October that it would go ahead and trim its output by 1.2 million barrels a day, or roughly 4% of its total daily output, starting the first of November. But could this decision be trusted? OPEC does not exactly have the best reputation for adhering to production pull backs during times of high oil prices. Many felt that the decision to cut back on inventories was merely an attempt to please the Middle Eastern world, but was never meant to be taken seriously and was just a last ditch effort to create some price stability to keep oil trading at or above $60 a barrel.