February 8, 2016
A global recession is on the way. This truism of economics holds at any point in which the world is not in the grips of a contraction.
The real question is always when and how deep the upcoming downturn will be.
‘The crash will come, but it would be nice if it came two years from now’, Thomas Thygesen, head of economics at SEB told over 200 commodity investors and analysts in London last month.
His audience was rapt with unusual attention. They could be forgiven for thinking the slump had not already arrived.
Commodity prices have crashed by two thirds since their peaks in 2014. Oil has borne the brunt of the sell-off, suffering the worst price collapse in modern history. Brent crude has fallen from $115 a barrel in the summer of 2014, to just $27.70 in mid-January.
Plenty of investors sitting in the blue-lit, cavernous surrounds of Bloomberg’s London HQ would have had their fingers burnt by the price capitulation.
‘They tell you should start your presentations with a joke, but making jokes at a commodities seminar is hardly appropriate these days,’ Thygesen told his nervous audience.
Major oil price falls have a number of historical precedents. Today’s glutted oil market is often compared to the crash of 1986, the last major episode over global over-supply. Back in the late 90s, a barrel of Brent crude fell to as low as $10 in the wake of the Asian financial crisis.
This post was published at David Stockmans Contra Corner By Mehreen Khan The Telegraph /.
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