I'm having a hard time understanding the need for our sympathy in falling oil prices. The real problem is cited later in the article. “There is no wage growth, there is little consumer spending and the main concern is deflation, all of which is feeding into each other.”

So falling oil prices are indicative of decreased demand which is indicative of this robust 'recovery' that we're all being told we're enjoying. Freaking liars!!! TM

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December 12, 2014

An accelerating slide in oil prices triggered broader turmoil across international financial markets on Friday, capping a turbulent week for energy that has compelled investors to sell shares and corporate bonds.

The International Energy Agency cut its demand growth forecasts for 2015 on Friday, saying the rout in prices had so far failed to stimulate buying. Its comments sent crude prices to fresh five-and-a-half-year lows and brought the decline for the week to more than 10 per cent.

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Brent crude, the international oil marker that has plunged 45 per cent since mid-June, fell $1.95 to $61.73 a barrel. West Texas Intermediate, the US benchmark, dropped $2.23 to $57.72 — a level it last reached in May 2009.

WTI’s slide below the $60-a-barrel barrier has left investors increasingly worried that prices could decline much further before they stabilise, with ramifications for consumers, industry and central banks.

“Oil is a hugely traded financial asset. It links through the financial system and as it breaks down it becomes a huge tipping point,” said Robert Sluymer, technical analyst at RBC Capital Markets.

While lower oil prices are seen being a boon for consumer spending, a broader concern is that the sharp decline from above $100 a barrel in June, may not just reflect excess supply, but rather signal less demand, suggesting the global economy is decelerating.

Slumping inflation expectations also suggest the global economy faces a worrying one-two punch of weakening growth and disinflation, a scenario that has rattled investors preparing for the end of the year.

“The point is that positions, profits, balance sheets and sheer fear are driving things,” said David Ader, strategist at CRT Capital. “As the saying goes, you don’t want to catch a falling dagger let alone several of them.”

The speed of the descent in oil prices has cast a shadow across broader markets, with the US S&P 500 index falling 3.5 per cent this week, cutting its gain for the year to date to 8.3 per cent.

The S&P energy sector has fallen 18 per cent since the start of October with nearly a fifth of lower rated US energy bonds now trading as distressed securities.

US corporate bond prices have also come under growing pressure, with junk bond yields approaching 7 per cent. Investors have sought safer havens, pushing the yield on 10-year Treasury notes down to 2.08 per cent, while the dollar has been on the defensive this week.

Ten-year German Bund yields fell 5 basis points to a record low of 0.63 per cent, although the euro added 0.3 per cent to $1.2445 as investors contemplate the chances of more ECB stimulus after its cheap loan sale fell short.

The pressure across broad markets, however, is seen as being misplaced by some, particularly since the US economy is poised to benefit from cheaper energy costs.

“We would emphasise that one should view weaker oil prices as providing a disproportionate benefit to the US,” said Eric Green, economist at TD Securities.

The world’s leading energy bodies have pointed to a looming supply glut that is forcing international oil companies to make swingeing cuts to budgets.

The IEA, the wealthy nations’ energy watchdog, said in its closely watched monthly report that global oil demand will grow by 900,000 barrels a day in 2015 — 230,000 b/d less than the prior month’s expectations — to 93.3m b/d.

Relentless US production combined with Opec output that exceeded estimates has coincided with a demand slowdown in China and a weak European economy, sending oil spiralling lower.

“It may well take some time for supply and demand to respond to the price rout,” said the IEA.

The price plunge forced operators such as BP and ConocoPhillips to reassess spending plans this week and put pressure on currencies exposed to crude exports.

Although lower oil prices are often described as a ‘tax cut’ and a boon for the global economy, their stimulus effect in this instance may be modest, Antoine Halff, author of the IEA report, said.

Weak oil demand was itself a key factor behind falling prices, he added. “There is no wage growth, there is little consumer spending and the main concern is deflation, all of which is feeding into each other.”

Lowered expectations for Russia and other major oil exporters, a stronger dollar and the removal of subsidies in many consumer countries have so far provided limited support for demand, the IEA said.

On the supply side, the agency trimmed its non-Opec supply growth figures on

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