NYMEX crude oil price falls below $90 as credit crisis deepens in Europe

Crude oil fell below $90 a barrel in New York for the first time since Feb 2008 as the credit crisis deepened in Europe, adding to concerns that global economic growth will slow and reduce demand for fuels. European leaders pledged to bail out troubled banks and protect depositors. Crude oil for Nov 2008 delivery fell to $88.89 a barrel on NYMEX, the lowest since 8 Feb 2008. Futures have fallen 39% from the record $147.27 reached on July 11. The dollar rose to a 13-month high against a basket of currencies, reducing the investment appeal of dollar-denominated commodities.

- This looks a lot like panic selling and deleveraging of almost every asset class, in every sector and every country. There is a short-term disconnect between the paper price of commodities and the physical reality out in the real world.

China's car sales are increasing over 40%, the world's second- (or third- by now) largest oil field, Mexico's Cantarell is declining over 30%, world grain levels are still at the lowest in decades, world central banks are getting ready embark on a co-ordinated effort to inflate all of their respective currencies to oblivion, and the media is starting to celebrate the demise of the "commodities bubble"?

Not so fast. Let's see a global economic collapse first, and an actual decrease in the money supply, then we will talk about demand destruction and monetary deflation. Not before then.

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