Scott Martin: Crude prices have declined about 12% since their late April peak. Based on everything else we have seen, the oil market has not suffered nearly enough.
Compared with other key industrial commodities such as copper, oil still looks fairly expensive. Take a look at how far copper funds like the iPath DJ-UBS Copper TR Sub-Idx ETN (NYSE:JJC) have plunged since Aug. 1 while the United States Brent Oil ETF (NYSE:BNO) and other petroleum funds have barely trimmed their sails:
If Dr. Copper has the right prescription, then global economic activity has at best plateaued, and that should depress underlying demand for oil — at least in the short term.
Funds like BNO and its counterpart that specializes in West Texas Intermediate crude, U.S. Oil ETF (NYSE:USO), have room to fall.
And as oil goes, so goes Russia. The IMF is already rebalancing its models to see what would happen to the Moscow market if crude dropped to $50 a barrel.
The results are not pretty, and even the thought is adding to the pressure on the Market Vectors Russia ETF (NYSE:RSX) and other Russia funds today.
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