Citigroup warns of impending 'oilmageddon'

According to the bank’s research team a strong dollar, lower commodity prices, weak trade and declining growth in emerging markets could result in a “negative feedback loop” across the global economy. Banks who are tasked with fighting off these forces and defaltion could result in another global recession.If the loop were to continue, Citibank warns that the world could slip into "significant and synchronized" global recession.

Analysts Jonathan Stubbs, Ayush Tambi and Nikhil Jadhav wrote: "It seems reasonable to assume that another year of extreme moves in USD (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop. Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon. Oil prices are likely bottoming. Greater stability lies ahead for FX and commodity markets. The death spiral is in nobody's interest. Rational behavior, most likely, will prevail" In the last year and a half oil prices have dropped more than 70% to $31 per barrel.

The lowering in oil prices have been to a benefit to countries who import oil such as China and India. The lowering in oil prices have been to a benefit to countries who import oil such as China and India. Citi said that the lowering of oil prices caused a slowdown in trade and capital flows, which is slowing down the global economy.

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