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. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. 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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