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Gasoline markets slip, financial markets stumble

By Paul Hodges on 23-Jun-2009

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.