If the market was truly worried about an economic recession, oil prices would be sharply lower.

As global stock markets plunged last week, crude oil actually gained about $0.90 cents per barrel. True, most other commodities declined as growth fears gripped world markets. But not oil. Crude prices did indeed slip yesterday amid the continued selling, but overall, prices remain firm over the last seven days as markets have corrected about 7% from their highs. In today's pre-New York opening, oil prices are up another $1 per barrel as Asia and Europe finally rally following a week of protracted selling.

Current supply and demand for crude oil remain tight.

Oil supplies are running at approximately 86 million barrels per days against demand at about 85 million barrels. That's an awfully tight market and indicative of an industry with barely any spare capacity.

Previous recession-led market declines over the last 35 years has indeed resulted in lower oil prices. That's not the case with this sell-off, which I believe has more to do with traders and investors looking for excuses to sell a heavily overbought global market since last August. Previous recessions have not started with interest rates this low, bank credit growing in the double digits and inflation benign. That's why I'm still a buyer of raw materials at these prices, especially everything energy-related, gold-mining, zinc-mining and the junior mines in Canada.

One of the biggest bargains now are the large-cap oil companies. After leading the market from 2003 to mid-2006, these stocks have been clobbered, particularly the large-cap European majors. My astute colleague at Sovereign Society, Mike Burnick, just plugged a basket of these great companies a few weeks ago -- without a doubt one of the best absolute values in the market right now. I also like the Russian oil giants, sharply lower over the last three months.

The global economy is not heading into recession. We're definitely slowing down as this economic cycle matures, but we won't see a recession until a classic monetary squeeze occurs or when interest rates rise again accompanied by higher inflation.

Oil, after languishing since last August, will shortly embark on another major rally along with the depressed oil majors. I also expect the market to receive a boost from heightened geopolitical fears in the Middle East, too docile since last fall and long overdue for another simmering as the U.S. State Department challenges Iran to some sort of military confrontation in the Persian Gulf. 

I'm heading to Austria this evening. I'll post here on Thursday from Vienna. I'm also heading to Rome, Copenhagen, Stockholm and Zurich on this trip. I'll give you the latest views and market news from Europe over the next 10 days. See you Thursday.