Domestic GDP growth for Q2 fell well below expectations. Is the recovery – already slow – grinding to a halt? Or was the drop in dollar terms due simply to a sharp sell-off in energy prices? While we would love to say the latter, the truth lies in parts of both.
Over the last month implied volatility in the oil market, as measured by the CBOE’s oil volatility index (OVX), had trended steadily lower. The reduction in the costs of uncertainty, as it were, is a function of the one-sidedness of the bullish trend over this period.
Another clear sign that attempts by oil-consuming nations to manufacture lower prices (without addressing long-standing structural constraints in physical cost drivers) has failed miserably.