The daily oil chart shows that oil has been in a rally since early December. Currently, prices are above the 200 day EMA. All three shorter EMAs have moved through the 200 day EMA, and all shorter EMAs are rising. Volume is supportive. While the CMF is very bullish, the MACD is weakening a bit.
A move through the 98 price level makes 100 the next logical price target.
So -- at what price does oil start to choke off recovery?
Brent just crossed the 115 level, which could slow growth in the EU.
1 comment:
Research by Douglas-Westwood indicates that recessions occur when oil consumption reaches 4% of GDP or higher for a sustained amount of time. Moreover, a 50% increase in oil prices within one year indicates a recession just around the corner. However, when the economy is still weak, an oil shock has less effect.
What this means is that when West Texas Crude reaches 85 dollars per barrel in 2008 dollars for a sustained period of time, a recession becomes likely. Thus, in 2013, the borderline is about $90 per barrel for a sustained period of time. This indicates that oil prices is a big threat to the economy. On the other hand, for oil prices to increase by 50% this would mean about $115 per barrel. Under this standard, we're still ok.
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