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Crude Oil Price Dive Risks Global Recession

Posted by: : Paul EbelingPosted on: January 26, 2015 Crude Oil Price Dive Risks Global Recession

Crude Oil Price Dive Risks Global Recession

Many economists are saying that the deep dive in Crude Oil prices since June 2014 will prove to be a boon for the global economy, but…

But a survey of 306 investment professionals by the ConvergEx Group is showing a different picture, as 68% of the respondents think Crude Oil prices will keep falling, while only 20% said that they felt Crude Oil prices had made their lows.

And 20% believes that if Crude Oil slides to below 30 bbl, a global recession is coming for sure.

“The idea behind this question was simple: at some point Crude Oil prices are not  just a nice theoretical tailwind for global economies,” the Chief market strategist at ConvergEx, wrote in a note.

“Rather, they become a signal that worldwide demand is contracting so quickly that oil prices must quickly decline to reflect that fact.”

To be sure, 66% of respondents think that Crude Oil prices at current marks are positive for the US economy, while only 22% think they are negative.

In addition, 85% sees Crude Oil prices between 40 – 80 bbl by year-end.

“Bottom line: market participants see the proverbial barrel as half full right now, happy with the potential boost to economic growth from lower energy prices. They also expect prices to stabilize by the end of the year, or move higher. Before that, however, watch out. The volatility in oil markets isn’t over yet.”

World Bank (WB) President Jim Yong Kim begs to differ with the forecast of global recession. “Our projection is around 3 percent [for world growth this year], so you could see a 15 to 20%  increase in growth if those oil prices stay low,” he says.

That’s because historical data indicate a 30% decline in Crude Oil prices would boost global GDP by half a percentage point, Mr. Kim said.

HeffX-LTN Analysis for OIL: Overall Short Intermediate Long
Very Bearish (-0.63) Bearish (-0.49) Very Bearish (-0.70) Very Bearish (-0.71)

Stay tuned…


Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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