Gasoline markets slip, financial markets stumble

Yesterday’s financial market action was very revealing. As Olivier Jakob of Petromatrix perceptively describes it, “liquidation on gasoline led to a correction in crude oil, which in turn pressured equity markets”.

The problem is that financial markets now seem to be in circular mode:

• Speculation about tighter oil markets has led to a belief in ‘green shoots’
• In turn, this has led a stunning global equity market rally since March

Yet the “real economy” still seems to be stuck in recession.

President Obama acknowledged today that a second “stimulus programme” may become necessary, as the first has failed to prevent US unemployment rising above the 8% level he had expected. Equally, in a major negative for chemical sales, it was revealed that foreclosures now account for 1 in 3 of every US home sold.

The bulls still insist that oil can reach $80/bbl, and that stock markets are not in just another bear market rally. But yesterday’s gasoline weakness is a clear sign that doubts are beginning to appear.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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