Watching Oil for Real Economic Clues

Oil prices and the US Oil Fund ETF (USO) leapt 4% off of Friday's low in sympathy with the climb in the Euro/USD and as part of an investment portfolio that mimics the direction of equities. That said, oil is a vital industrial good that is much more subject to the laws of supply and demand than portfolio decisions these days. The fact that oil is 15% beneath its May high of $87.15 is significant, and warns me that in the real economy, not the fantasy world of financial and monetary tinkering, perhaps the demand for oil is way down and reflects economic slowdown in China, etc. This commodity bears close watching, especially in its relationship with the equity indices. The more it underperforms, the more it will be telling us what is really going on "out there."

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