Wasn't monetary expansion supposed to drive commodity prices higher, and especially oil?
Instead, we read this:
The oil market didn’t get the memo. Hard assets were supposed to rise on unconventional monetary policy. Instead, crude nosedived.This week’s breakdown in oil futures left veteran traders scratching their heads. It also ran counter to signs in other markets of a pick-up in expected inflation after the Federal Reserve’s launch of another round of “quantitative easing”, the US central bank’s emergency asset-buying programme. Rather than higher inflation, tumbling oil prices point to reduced price pressure and more room for manoeuvre for central bankers.
The Fed announced QE3 on September 13 and, initially, commodities gained smartly. But late on Monday Brent crude tumbled $4 a barrel in just four minutes, apparently inexplicably. The next two days erased another $5.60 and oil became what one analyst called a “falling knife”. The market ended the week sharply lower, even after a partial bounce.
