(Bloomberg) -- For all the talk of OPEC supply cuts and surging shale production, oil’s biggest problem is panic over the economy -- and the correlations show it.
During the last oil price crash in 2014, the S&P 500 Index and Brent crude moved in opposite directions. Oil’s fall failed to prove much of a drag on U.S. equities and vice-versa, as represented by a strong negative correlation coefficient of .65 between the two assets.
That’s changed during the commodity’s current collapse. Brent and the S&P are moving in tandem: The correlation has turned positive and strengthened to a robust .75.
“There’s nothing OPEC can do about that predicament," Sam Margolin, a Wolfe Research LLC analyst, wrote in a note Thursday. “The solution lies only in market confidence around global growth, the U.S.-China trade war, and the pace of Fed rate hikes."
While Wolfe sees “constructive" signs for 2019, they’ll only translate to oil “whenever they translate across broader sentiment."
