Oil prices were riding high after several weeks of steady, significant gains. It’s never really clear what it is that might actually move markets in the short run, whether for crude it was Saudi Arabia’s escalating activities or other geopolitical concerns. Behind those, the idea of “globally synchronized growth” that is supposedly occurring for the first time since before the Great “Recession” while it may not have pushed oil investors to buy crude (futures) it certainly didn’t add any coincident selling pressure.
It’s likely a path of least resistance kind of thing, though the question is why. In other words, “global growth” is a story we’ve heard so many times before and we know how it ends. That is very likely why even after this latest price jump WTI is struggling toward $60 rather than $90 or $100 (or why rubles, real, junk credit, etc., can’t fully rebound, either). Markets are a quite a bit more aware of what’s really going on than how the world is described in the media.
In other words, oil may be rising on upside risk potential, the Middle East at the forefront of those, but also the small possibility that “globally synchronized growth” does happen, that the Fed does get one thing right after the last ten years. If it was anything other than a slight probability, with actual evidence for it, WTI would be flirting with $90 or $100 because that’s how markets work.
So when the International Energy Agency (IEA) cuts its forecast for global crude demand growth, those downside risks are also factored in to the price holding it below $60. For the mainstream, however, it’s somehow a bit shocking:
The IEA on Tuesday delivered a surprisingly downbeat outlook for oil demand in its monthly market report, showing an expected slowdown in consumption that was at odds with a more bullish view from OPEC on Monday.
The word that stands out in CNBC’s description is “surprisingly.” Only if you believe in “globally synchronized growth” is it anything like surprising. The data is all there quite easily dispelling every such notion.
