The inversion of the bond yield curve last week is not a good omen for the oil market.
Roman soothsayers would look for omens in the flight of eagles or the entrails of sacrificed animals, before advising whether to fight a battle. The inversion of the bond yield curve on Wednesday, often a harbinger of recession, is clearly not a good omen for the oil market. But should the oil exporters step up their campaign to protect prices, or retreat?
The yield-curve inversion, where short-term bond yields exceed long-term ones, has predicted US recessions since 1956, but the recessions themselves have followed between three and eleven months later. Some analysts downplay this warning because of special circumstances – worldwide central bank rate cuts, a secular fall in inflation and population growth – but there are always special circumstances.
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WNU Editor: The market is dictating what OPEC must do. And for the moment it is to try and keep the status quo.
