• 6 minutes Does Anyone Think the EU Can Successfully Defy US Iran Sanctions?
  • 11 minutes Does S Arabia Have 2 Mln Barrels in Spare Capacity?
  • 16 minutes WTI needs to stay above 70.x, for rally to continue.
  • 16 hours Can US sue OPEC?
  • 24 hours Rally on Hold, if 69.5 don't break, 62.5 could be next.
  • 19 hours US disavows carbon tax
  • 2 hours What's wrong with SA oil consumption?
  • 3 hours Verbal War - Merkel: Europe Can't Rely On U.S. To Impose World Order
  • 3 hours GE CEO: China Tariffs Could Cost Conglomerate Up To $400 million
  • 24 hours FBI Director: Russia Continues to Sow Discord In The U.S.
  • 8 hours Rio Tinto Says $4-Million Goodbye to Coal
  • 4 hours XOM @ 83 headed for 70s
  • 2 hours Will the trade war hurt US project builds? Not if the US does it right.
  • 1 day Chile Becomes The Latest Country To Commit To 100% Renewables
  • 1 day Iran's President Warns Over U.S. Push For Countries To Stop Buying Oil From Iran
  • 1 day Where 3 Million Electric Vehicle Batteries Will Go When They Retire?
  • 23 hours Britain Has Identified Russians Suspected Of Skripal Nerve Attack?
Alt Text

The Best And Worst Oil Price Predictions

Oil price forecasting is a…

Alt Text

Goldman: Brent To Retest $80 This Year

Goldman Sachs still expects oil…

Martin Tillier

Martin Tillier

More Info

Trending Discussions

Explaining The Big Drop In Oil Prices

Oil

As I’m sure you are aware, over the last week and a half, U.S. stocks have taken a massive hit. The reason we are told, is that the widely followed and frequently indicative forex and Treasury markets are both suggesting that inflation fears are growing. It is understandable if all the potential ramifications of that elude you as inflation was last a real problem back when Reagan was President, but most know that it involves higher prices of goods and commodities. So, logically speaking, inflation fears should be pushing oil higher, right? Wrong.

(Click to enlarge)

As you can see from the above chart for WTI futures (CL), the U.S. benchmark crude contract has instead dropped around ten percent from the highs, following the stock market lower. If you think about it, though, that shouldn’t be a surprise. Stocks, like commodities should also logically trade higher on inflation expectations, but they are collapsing too, so something else must be going on. In fact, it is not one thing, but several things that make this seemingly counterintuitive move perfectly understandable.

First and foremost, what the stock market is reacting to is not the prospect of inflation per se; it is the prospect of the response to the prospect of inflation. Part of the reason that inflation has not really been an issue in the U.S. since the days of big hair and disco is that the Federal Reserve Bank has become a lot better at seeing the warning signs of rising…

To read the full article

Please sign up and become a premium OilPrice.com member to gain access to read the full article.

RegisterLogin

Trending Discussions





Oilprice - The No. 1 Source for Oil & Energy News