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. 
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