Since July 2024, the price of crude oil has fallen from a high of $88/bbl to the current low of $71/bbl. In a normal economic scenario, this would indicate a positive road ahead but given the current scenario, it might be more of a worrying sign.
The current environment is on the edge of peak interest rates but at the same time, it is coming out of a long high growth environment. Given that excessive savings in the USA are about to finish up by this festive season the growth is likely to fall in the quarters ahead.
On the other end of the map, China has struggled with the economy as loan growth, property sales and consumer spending are still slow. The only respite might be the measures before the Lunar holiday next year in February.
In addition to this most countries are only witnessing growth in the service industry. All these issues combined with the oil supply reversal that is likely delayed until next year put a cap on the oil prices. This would be positive once the growth problems have completely unfolded.
The only risk to this higher price limit is the escalation of conflict in Lebanon that might result in ground invasion by Israel. This would limit the interest rate cuts and create another uncertainty element in the global economy.
Comments