Decrease in the price of oil – the sentence for the stock market?

The price of oil «Brent» Wednesday fell to a 13-month low, amid oversupply in the market. However, some experts believe that this attenuation can talk about something more sinister in the world economy, while this risk can be spread to other assets.

“It’s all in demand,” – said Michael Hewson, chief market analyst at CMC Markets. The price of oil – a leading indicator of global demand, says Hewson, predicting that it threatened more downside than upside risks, in the absence of any unforeseen geopolitical events.
He agrees that the current outlook for global economic growth, perhaps overly optimistic, and sluggish demand in Europe and China, along with the expected normalization of interest rates in the United States and Great Britain can pull investors from heaven to earth.

“I think the current weather – it’s too much,” – he said, adding that the mood in the markets were too optimistic most of 2014.

Price on «Brent» and «WTI» has been relatively stable the past two years, since the expansive monetary policy of central banks coincided with the “bullish” trend in the stock market. In June, the price of oil rose sharply after it became aware of the seizure of vast territories Islamist militants in northern Iraq.

Soon, however, the price came down. On Wednesday, crude oil «Brent» cost $ 102.45 per barrel, almost at least since June 2013 American crude oil fell to $ 97.16, the lowest level since February this year.

This trend was observed in the last few weeks, despite the tension in Iraq, Libya and Ukraine, although the latest report by the International Energy Agency (IEA) is still affected markets. On Tuesday, at the IEA said that the past few months, demand for oil was weak, and a surplus of oil on the markets helped limit the price. Markets were “intimidating” calm in the face of growing geopolitical risks. Marshal Gittler, a currency strategist IronFX said that the invasion of Iraq SBC – through targeted airstrikes, and introduction to military advisers – will mean a further decline in oil prices, as it will decrease the risk premium.

Decrease in the price of oil has traditionally stimulated the growth of certain assets, such as shares of the airlines that depend on this valuable raw material. However, Caitlin Brooks, research director at the London Forex.com, believes that, overall, this has a negative impact on the stock markets.