I recently explained that it’s one thing for a central bank to artificially prop up its own stock market. It’s another thing entirely to even imagine doing something similar to falling oil prices. What’ll they do – buy oil futures? Give me a break.
Oil hit a six-year low this week. As I write this, it’s around $43, closer yet to the $42 target I forecast when oil bounced back to $63. After another tepid bounce, it will very likely fall to the $32 support level we saw in late 2008. John Kilduff, a leading oil analyst who will be speaking at our Irrational Economic Summit in Vancouver next month, sees this happening earlier than his original Christmas call.
But oil just got another kick in the shins this week when China decided to return to its old tricks again.
The People’s Bank of China’s move to intentionally lowered its currency – to fight the slowdown made all too obvious by an 8.5% decline in exports – is fundamentally no different than injecting $0.5 trillion into its stock market’s bloodstream or buying empty condos to keep its real estate from tanking. It’s one economic manipulation after the other!
This raised concern over China’s demand for commodities. A weaker yuan probably means fewer imports, and so less demand. As a result, oil and other commodity prices slumped.
This post was published at Wall Street Examiner by Harry Dent – August 13, 2015.
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