While the shape of the recovery continues to be very similar to that seen after the 2009 low the magnitude of the move is less. We have not and would not expect the bounce from a structural supply driven fall to be as aggressive as that generated by a collapse in economic activity/demand.
Post the late 2008/ early 2009 lows around $32.40-$32.70 Crude eventually recovered to levels above $115 in 2011
The “sized overlay” above suggests that if we continue to follow the path we have seen so far that levels in the region of $64+ could be seen in Q1/Q2, 2018 This picture fits with our bias that the reflation trade did not die but rather went into hibernation and that in the months ahead we are likely to see
– Higher Oil prices
– Higher Industrial metals prices
– Higher US yields
– Higher equity markets
|Comments||Allow several months for the trade to develop|