Friday, May 6, 2011

Unrefined Reversal

On the global commodity bourses,
Crude oil is subject to forces
Like the gasoline price,
Which, when high, may suffice
That the market puts carts before horses.  

A sudden, 8.6% plunge in the price of crude oil to $99.80 a barrel yesterday originated with a surprising source: the high price of US gasoline.  Fears of an imminent "double dip" into recession have been fed by gas prices approaching $4/gallon.  Oil, which - though the main ingredient in gasoline - is sensitive to economic cycles, was evidently poised for a break to the downside.  All that was needed was a surprisingly bearish announcement, and the market got two: European Central Bank President Jean-Claude Trichet implied no imminent hike in euro interest rates, which strengthened the dollar; and new jobless claims were higher than expected, which weakened the US growth outlook.

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