The big chill of recession and a banking panic now haunts black gold, exactly as it did in the last six months of 2008 when Brent crude plunged from $148 a barrel in July to barely $40 in December. Brent crude was $85 two weeks ago and plunged to a low of 71.4 on Friday. It is ironic that crude oil prices are in a free fall even though Russia, a Big Three producer is under sanctions and China, the world’s largest importer of commodities has just reopened after a draconian Covid lockdown. The spike in crude oil storage tanks to 150 million barrels suggests a supply glut in the wet barrel market.

It is entirely possible that global inventories of crude oil rise by another 50 million barrels in April and May as the China reopening theme is unmasked as a macro delusion. This means Brent crude can well fall to $60 a barrel, a macro call I made months ago. Since GCC currencies are pegged to the dollar and cannot depreciate when oil prices tank, the burden of adjustment falls disproportionately on the asset markets, stocks and real estate. As in 2008/09, a spike in global bank funding risk and a free fall in oil prices guarantees a liquidity squeeze and a collapse in speculative real estate prices in the Gulf. Offplan punters should do not forget the lessons of history and the existential fact that the laws of economics are not repealed in New Dubai.