Oil (West Texas Intermediate Crude) dropped 58% ($108 to $45) from mid-June to February. After a quick “dead cat, short-covering” bounce, it has dropped 13.5% in a week back to $45. It’s down 4% today. Is crude getting ready to crash into the $30’s? click to enlarge:
Don’t let the “oversupply” narrative coming from Wall Street infect your analysis. The reason there’s an “oversupply” is because demand is cratering. Demand is cratering because end-users, especially in China and the U.S., are going broke. Unequivocally, this plunge in the price of oil represents a plunging economy, globally and in the U.S.
Of course, the cure for this is to convince everyone that the most important event ever is next week’s FOMC meeting, where the entire financial world is supposedly losing sleep over whether or not the Fed will remove the word “patient” in reference to its stance on maintaining a free money policy – aka ZIRP – aka zero interest rate policy.
You just can’t make this up. It is a fairytale of epic proportions. Alice in Wonderland meets The Wizard of Oz. The fact of the matter is that the Fed can not and will not raise interest rates. Whether or not the Fed includes the word “patient” in its policy statment is nothing more than the most absurd operatic comic book in history.