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 JJC (quote) have plunged since Aug. 1 while BNO (quote) 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.
Add in a strong dollar and bearish guidance from world-class companies like Fedex (FDX, quote) and the outlook for oil is simply not good.
Funds like BNO and its counterpart that specializes in West Texas Intermediate crude, USO (quote), 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 RSX (quote) and other Russia funds today.