What a move over the weekend. The April crude oil contract has just reopened for trading on Monday evening and is up 9% at $98. Libya is clearly no Egypt as the OPEC member causes much greater concern about the future price of oil. This is not a good sign for the US consumer who is already exhibiting signs of weakness early this year.
Merrill Lynch has previously stated that $120 oil is the “breaking point” for the US economy. Oil remains a great risk to the recovery. The fragile US consumer must divert $2.6B every week for every $1 rise in gasoline prices. If gasoline prices continue to surge towards $4 (a very high likelihood given current trends in the Middle East and seasonality) we are staring at a substantially weaker US consumer and cuts in GDP estimates in the back half of the year….