1. Oil and the Global Economy
Oil prices continued to fall through Thursday when New York futures traded below $80 a barrel and London as low as $82.60. Prices then rebounded to close Friday at $82.75 in NY and $86.15 in London. As has been the case for several weeks, the 25 percent price drop from the year’s highs was based on the perception that there is a glut of oil on the world market; the Saudis and other Gulf Arab states refusal to cut back production immediately; and fear. There are mixed opinions as to whether we have seen the bottom of the price plunge. Better economic data appeared on Friday and Goldman Sachs issued a report challenging the notion that the world markets are over supplied. They believe prices have overshot on the downside. Others, however, note that the pause in the price decline may only be profit-taking and that there is unlikely to be any change in OPEC policies until at least the end of November. Taking advantage of the relatively low prices, China seems to be stepping up its imports, likely to bolster its strategic reserves.
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