At the moment, the underlying theme in almost every trade is global growth. Nowhere is this more evident than in crude.
Granted, production is at the highest levels ever but the demand side of the equation dominates oil prices.
WTI is at the lowest since October.
If WTI breaks below $75, the market is telling us that global growth is rapidly softening. China, the US and especially Europe will grow less than expected this year and next.
For confirmation, look to prices of base metals. Oil isn’t always a leading indicator for growth but copper, aluminum and nickel usually are.
At the moment, base metals are teetering and in danger of a plummet.
If oil and base metals break down, it won’t be long before there is a rout on the commodity currencies and the euro. My sense is that we haven’t seen enough evidence yet so we will see a near-term bounce in sentiment.
