Oil is slumping on fears rapidly rising rates will cause recessions. But the issue of supply threats and underinvestment can’t be forgotten.
It might surprise anyone who’s bought petrol in the last few months, but the oil market is in a slump. And it’s a pretty bad one too.as much as 4.5 per cent to briefly touch $US102 a barrel on Wednesday night, taking losses over the last two weeks to 22 per cent, meeting the definition of a bear market . Brent crude has been more resilient, but is still firmly in correction territory, down 10 per cent over that period.As always, there are a few factors playing into this decline.
“If the oil and agricultural complex joins this bear market, headline CPI inflation could quickly collapse to below zero just as it did in 2008-09, when headline CPI fell from 5 per cent to -2 per cent in just 12 months,” Edwards says. Tran sees oil holding around $US90 a barrel. He says while the paper oil market is falling, RBC’s tracking of actual sales of actual oil barrels suggests the physical market is very strong. The strong prices worldwide for petrol, jet fuel and other refined oil commodities also speaks to this.
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