Drumroll Please…

In our October 6 update on oil [see: Update on CL] I expressed skepticism regarding oil’s ability to continue rallying.  It had just popped 30% off the Aug 24 lows, and had broken out of a triangle formed while digesting those gains.  Still, I saw it declining rather than making new highs.

…lower prices make sense.  And, they’re necessary — particularly in light of the critical yen carry trade.  Japan can’t very well devalue the yen against the dollar unless oil — which is denominated in USD — declines to offset the currency effect.

Yes, it means that marginal players — like the entire shale industry — will be decimated.  But, that’s a sacrifice that central banks are willing to make.  The health of the oil industry versus the wealth effect of trillions in rising equities?  No contest.

I was wrong about CL declining right away.  It didn’t start until October 9.  2015-12-29 CL 60 0600continued for members


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