The Market Ear with some groovy charts. Oil’s going to break.
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| Oil’s metals problem |
| The BCOMIN index can’t catch a bid. Despite the “collapse” since the nickel mania highs, this index has refused to bounce. Metals and oil moved in tandem for long, but the gap is very wide, despite the sell off in oil. Can we really have poor metals momentum and still have oil trade much higher? |
 Refinitiv | |
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| Oil’s dollar problem |
| The gap between oil and the mighty DXY is huge. Despite oil’s latest move lower, the gap refuses shrinking as the bid for dollars seems unstoppable. DXY (inverted) vs oil. |
 Refinitiv | |
| Oil’s demand destruction problem… |
| We are starting to see vehicle miles travelled and road fuel sales decline y-o-y. Sanford Bernstein writes: “We extend our demand destruction screen across 30 metrics in our energy recession risk heatmap, incorporating fossil fuel expense pressure, top down supply & demand trends, bottom up real time demand indicators, mobility signals, together with trade and industrial indicators. Today our Energy Recession Risk indicator is now flashing ‘amber'” |
 Sanford Bernstein | |
| Recessionary gorilla |
| Albert Edwards of Soc Gen has been spot on when it comes to his latest commodities bear view. On copper’s last moves he writes: “This is not so much a canary in the coalmine as a rout. Just as in mid-2008 I now see the recessionary gorilla charging towards us out of the mist“. Oil remains elevated compared to other commodities. Edwards says: “Soft-landing advocates must now face the overwhelming evidence of economic collapse and extricate their heads from the sand”. | |
| Prepare for the rates shock – implications on oil |
| Nothing really new from Albert Edwards but here is some poetry: “Headline CPI inflation will likely turn negative, and the inflation narrative will then evaporate (temporarily), so trigging a collapse in US 10y yields back below 1%. What a shock that will be!” Regular readers of TME are familiar with our 2008 comparison of metals leading the commodities crash in 2008. Oil was immune, until it wasn’t (here). Edwards mentions the collapse in agriculture back in 2008 that lead to a collapse in yoy deflation. Regarding oil he writes: “The same thing should happen with oil if there is a global recession despite the war in Ukraine. Oil prices this time last year were between $75-80/b, so it won’t take much of a fall from here to get into a yoy deflationary environment.” Second chart shows oil vs bond volatility. Can oil remain the relatively boring asset? |
 Soc Gen |
 Refinitiv | |
