GM2 Turbulence Ahead

The Gist: (1) The reacceleration of the global credit cycle and global M2 (GM2) in the summer of 2024 drove the recent recovery in oil. (2) Just as the oil market appears to be gaining momentum, turbulence may arise in the spring.

If I were speaking to my younger self and offering him advice, I would recommend studying more the ins and outs of banking and credit creation.

This is because when credit is extended, money is created, global GDP expands, oil demand rises, and prices respond accordingly—and vice versa.

Updating my GM2 vs. oil chart, we see that the global credit cycle may encounter turbulence in the spring, which could take some of the air out of oil’s recent momentum, as shown below.