08.12.2022
Crude Oil
This latest down leg in WTI has taken it two standard deviations below trend on Qi metrics.
History shows it can go further. In April 2020, a Russia - Saudi Arabia dispute compounded Covid lockdowns & WTI futures briefly went negative. That was a six standard deviation event on Qi.
In Q4 2018, when the Fed was on autopilot with regards to rate hikes and risky assets feared a Powell policy error, WTI experienced a four standard deviation shock.
The 2015 lows (China devaluation shock, US oil production glut) was a similar size move.
So big macro shocks can have outsized impacts on the energy market. And a 2023 hard landing could certainly rival some of the above. But it is worth noting the magnitude of the move seen thus far.
History shows it can go further. In April 2020, a Russia - Saudi Arabia dispute compounded Covid lockdowns & WTI futures briefly went negative. That was a six standard deviation event on Qi.
In Q4 2018, when the Fed was on autopilot with regards to rate hikes and risky assets feared a Powell policy error, WTI experienced a four standard deviation shock.
The 2015 lows (China devaluation shock, US oil production glut) was a similar size move.
So big macro shocks can have outsized impacts on the energy market. And a 2023 hard landing could certainly rival some of the above. But it is worth noting the magnitude of the move seen thus far.
