Oil is one of the biggest movers of the day, now back above $60.
That’s nearly 50% higher from the lows of late December.
Is that surprising? It shouldn’t be. Declines in both stocks and oil (late last year) were triggered by threats of sanctions on Saudi Arabia. We talked about it as it transpired in these daily notes. The stock market decline started on October 3rd when headlines hit that implicated the Saudi Crown Prince in the murder of the journalist, Jamal Khashoggi. Oil topped the same day, and then accelerated the day Trump spoke with the Saudi Crown Prince on the phone on October 16. Oil opened that day at $72 and hasn’t seen the level since (forty-three days later it was trading at $42).
The Saudi capital flight threat dissolved as it became clear later in the year that the U.S. would sanction Saudi individuals only — and not the Crown Prince, nor the government. Sill those geopolitical risks early on, soon turned into eroding sentiment — as lower stocks, feed weaker confidence.
But we’ve had a full “V-shaped” recovery in stocks. And I’ve suspected we would see the same in oil prices. And the catalyst has been a coordinated response from global central banks, not too dissimilar from what we saw in 2016, following another oil prices crash. Oil and stocks rallied aggressively back then. And we’re seeing a similar result this time.
Remember, we looked at this chart back in February…