Oil is back on the rise following a report by the NOAA that suggested that we were in for a "worse than average" hurricane season. The hurricane season officially begins 01-Jun and the NOAA believes that as many as nine hurricanes could form in the Atlantic this year.

Any increase in forecasted hurricanes increases the likelihood that one may enter the Gulf of Mexico, where a considerable portion of US crude output comes from. More importantly, a significant percentage of US refining capacity is located in the Gulf Coast states.

Legendary hedge fund manager T. Boone Pickens also has added his voice to the bullish cacophony, saying that oil is headed to $150/bbl. This forecast is consistent with Goldman Sachs' recent update to their projected annual price average of $141/bbl for 2008. Both Goldman and OPEC have suggested that prices may go as high as $200/bbl.

Investment demand has certainly added to the upside impetus in oil, as individuals and funds seek shelter from the weak dollar and skyrocketing inflation. Once you've got a strongly trending market, speculators play a significant role in driving prices higher yet.

The ability of individual investors to access the oil market through ETFs and commodity funds has been a big factor in the oil market in recent years, as it has in the gold market.

However, there is plenty of evidence to suggest that strong market fundamentals are in play as well. The Paris-based International Energy Agency announced yesterday that they would make sweeping changes to their much watched forecasts as we enter a "new world energy order."

The EIA put the market on notice that their new forecasts would be upsetting. A report slated for release in November is expected to show that global oil supplies will drop substantially through 2030, lending considerable credence to the peak-oil scenario.

The anticipated drop in supply comes at a time when global demand is likely to continue expanding at a breakneck pace. For example, some estimates suggest that automobile ownership in China alone will increase by 3000% over the next several decades.

That's a pretty startling number, but even more startling will be the impact on oil and gasoline prices that result from this increased demand. Ponder the broader economic impact resulting from the energy-based inflation that is likely to be generated.

The market is going to want to find the point where prices either significantly curtail demand or make new technology -- new exploration or methods for extracting crude and alternative fuels -- economically feasible. I don't think we're at that point yet.

Also think about the autocatalyst platinum demand all those new cars are going to generate, in a market that is already in deficit.

Consider the likely impact of all this on gold prices.

I ran across the following chart this morning on the Resource Investor website. I've written a fair amount about commodity super-cycles on these pages, but I've never quite seen it presented this way. It just happens to tie nicely into today's topic.

I do question the 300 mln inhabitants under Japan Industrialization. I'm not sure exactly what the creator of the chart was hoping to convey there, but a pretty compelling story nonetheless.

Gold Market Movers:

US existing home sales for Apr -1.0% to 4.89 mln.

Eurozone manufacturing PMI for May fell to 50.5. Services PMI dropped sharply to 50.5.

Singapore CPI surges 7.5% y/y, a 26-year high.

IEA reviewing long-term oil supply outlook

Eurozone growth sinks to five-year low

Unsold houses rise to 23-year high in April