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George Soros, the billionaire hedge fund manager, will warn later today that the oil price has become a bubble that could trigger a stock market crash.
The Financial Times reported today that Soros will tell the US Senate commerce committee that oil was pushed to its recent all-time peak of $135 a barrel by a new wave of speculators.
He believes that the doubling in the price over the last year is partly due to investment institutions, such as pension funds, who are pumping money into indexes.
The Institute for Supply Management's index of manufacturing activity edged up to 49.6 in May compared with an April reading of 48.6, easing some concerns that soaring oil prices were crushing manufacturers. However, the reading remained below 50, the dividing point that indicates if manufacturing is in a recession.
With global stock markets still weak compared with the robust gains of the past few years, many investors see better potential for gains in the oil market. Speculative buying has been cited as a major reason behind oil's more than doubling its price in a year.
"As an asset class, oil has performed better than stocks and bonds," said Shum. "Until global equities turn better, oil demand collapses or supplies increase significantly, we're not going to see a substantial drop in oil prices."
oil demand collapses or supplies increase significantly
Originally posted by Karlhungis
Demand is dropping, in the US at least and I think that the people who are heavily invested in oil are the ones that want everyone to believe that supplies are low.