Markets have endured a torrid three months, driven by concerns over interest rate moves in the US, the ongoing trade war between the US and China and faltering Brexit negotiations. The average equity market has fallen by c9% since 1st October, erasing gains from earlier in the year and setting up 2018 to be possibly the worst year for markets since 2008.
The said, whilst it has been a very difficult year for equity investors, it has been materially worse for those investing in oil. Earlier in the year oil prices rallied to $86 a barrel, a high not seen for three years, before plummeting a staggering 29% since the beginning of October. Oil is now down nearly 10% for 2018. With investors understandably concerned mainly with equity market valuations, it is easy to underestimate the significance of oil price movements and their impact on the global economy. This month we consider what has caused the huge swing in prices over the year and how the price of oil might affect the global economy during this period of high uncertainty across all asset classes.