European Panic Does Not Equal Higher Oil
There is a solid divergence developing between reality and the price of oil. Oil continues to trade around the $97.00 per barrel level. This is a gain of 25% in the last couple months. The price of oil is reflecting major uncertainty in the Middle East. Reports of Iran's nuclear ambitions continue to worry the world. That is part of the increase in oil and cannot be argued. However, this global optimism about a major resurgence of growth is a fantasy. Today, bond yields in Italy hit a high of 7.5%. This is the next domino to fall after Greece. Following Italy will be Spain, Portugal, Ireland and eventually France and the United States. Global growth will continue to be very weak for years to come. Once the Iranian situation cools down and reality on Europe fully is seen, oil will head back to $75.00 per barrel.