Oil and Stocks, Sitting In A Tree …
Oil prices slumped Wednesday, yet now they’re strangely higher. The curious move may have more to do with stocks than oil.
As the WSJ’s Carolyn Cui recently reported, crude oil may now be more influenced by the stock market than its own inventory levels or demand patterns. Earlier this month, Cui pegged the correlation between crude and the Standard & Poor’s 500-stock index at around 70%, roughly double the average since 2008.
That love fest seemed to be in evidence Wednesday. Oil futures dipped as low as $70.76 a barrel, the lowest since June 8, after a weekly report showed that U.S. crude, gasoline and distillate inventories got large, unexpected increases last week. That makes sense: If there’s more supply of oil, prices should fall, along with share prices of companies in the energy sector.
But instead, oil prices later popped higher, trading up 1.4% at $72.52. That seems to mirror what happened with stocks, where the Dow briefly sunk below 10,000 for the second straight day, before jumping higher. The S&P 500 also dipped and then delivered.
The Dow is now up 31 points, or 0.3%, at 10,067. The S&P 500 is up 4.6 points, or 0.4%, at 1056.
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