From Houston to New York, energytraders and commodity investors are watching a new and unusual market phenomenon: a persistently high correlation between oil and stocks.

Crude oil is now influenced more by the stock market than by its own inventory levels or demand patterns. Lately, that lockstep has reached an extreme, with the correlation between crude oil and the Standard & Poor's 500-stock Index hovering around 70%, doubling the average of 34% since 2008.

Oil and stocks aren't supposed to swing in sync with each other. Unlike stocks, which are priced off corporate earnings, oil is usually driven by supply-and-demand dynamics. Since oil started trading in 1983 at the New York Mercantile Exchange, the linkage between the two markets averaged a meager 0.1%. Though there have been sporadic spikes, it has never stayed at such an elevated level for as long as it has lately.

The typical low correlation -- a measure of the direction and magnitude of the daily movements in the two markets -- causes many investors to include commodities into their portfolios of stocks and bonds to diversify and smooth out swings in their other investments.

Oil and stocks started to walk in parallel when the financialcrisis erupted, as all markets were jolted by the same broader economic conditions. Many investors had expected that to be a passing trend. Instead, the linkage has been in place ever since and recently grew even stronger.

Last week, this high correlation was a double-whammy for investors who owned both oil and stocks. A 4% selloff in stocks was compounded by a 7% loss in oil prices.

At ConocoPhillips, seniorenergytrader Dakin Christenson said he now has a computermonitor set up next to the oil charts to give him a real-time reading of the stock market. Even though he doesn't trade stocks, 'they have become a key ingredient of oil prices,' he said.

The influence of stocks on oil became particularly evident in recent weeks as oil managed to rally despite its bearish fundamentals. Stockpiles of crude oil and petroleum products in the U.S. swelled to an all-time high in the week ending Aug. 6, while China, the primary engine of demand growth, cut back on its oil imports. Nevertheless, oil prices have gained 11% since late May.

In Houston, Andy Furman, managing director of Risked Revenue Energy Associates, a consultancy helping energy producers and consumers manage more than $25 billion in assets, has watched as oil prices have risen amid falling demand. 'You scratch your head,' he said, 'Why would we still follow the stock market?'A simple explanation goes: Stocks are a proxy of economic outlook. If stocks rise, it's a sign of growing demand for energy; therefore, oil should go up. And vice versa.

But the heightened linkage 'runs deeper than just the market psychology,' said Kevin Harrington, managing director at Clarium Capital Management LLC, a San Francisco hedge fund.

Oil and stocks are joined up by actual money flows, as more fund managers start to trade in both markets. Many of them are so-called 'algorithmic traders,' who trade based on technical signals instead of fundamentals. Meanwhile, the growth of exchange-traded funds that are invested in stocks and commodities makes it just a click away for investors to move assets around.

John D'Agostino, a former Nymex executive who helped found the Dubai Mercantile Exchange, said, 'It's fundamentally a breakdown of the market structure.' In recent years, commodity exchanges have built up their technologies to allow easier access for computer-based traders, which have become a dominant force in some markets.

Oil and stocks also cross paths in the so-called 'risk trade.' Traders generally think holdingspeculative investments, including stocks and oil, in a portfolio adds risk, and liquidating them removes risk. When their appetite for risk wanes, they pull money out of stocks and oil; when the risk trade is back on, they apply capital to both assets.

The 'risk trade' has reached a fever pitch recently, as traders grow jittery about the economic outlook.

'They tend to do the same things at the same time not because of the fundamentals, rather because there's so much money under management that they have become the markets,' said Wayne Penello, founder of Risked Revenue Energy Associates. 'In the short term, their actions overwhelm the fundamentals.'

Carolyn Cui

• energy [´enədʒi] n.活力，精力；能力 (初中英语单词)
• unusual [ʌn´ju:ʒuəl] a.不平常的；异常的 (初中英语单词)
• lately [´leitli] ad.近来，不久前 (初中英语单词)
• extreme [ik´stri:m] a.尽头的 n.极端 (初中英语单词)
• supposed [sə´pəuzd] a.想象的；假定的 (初中英语单词)
• unlike [,ʌn´laik] a.不同的 prep.不象... (初中英语单词)
• driven [´driv(ə)n] drive 的过去分词 (初中英语单词)
• measure [´meʒə] n.量度；范围 vt.测量 (初中英语单词)
• parallel [´pærəlel] a.平行的 n.平行线 (初中英语单词)
• financial [fi´nænʃəl] a.金融的，财政的 (初中英语单词)
• computer [kəm´pju:tə] n.计算机；电子计算器 (初中英语单词)
• monitor [´mɔnitə] n.班长 v.监控；检查 (初中英语单词)
• reading [´ri:diŋ] n.(阅)读；朗读；读物 (初中英语单词)
• evident [´evidənt] a.明显的，明白的 (初中英语单词)
• despite [di´spait] prep.尽管 (初中英语单词)
• primary [´praiməri] a.主要的 n.居首位的 (初中英语单词)
• nevertheless [,nevəðə´les] conj.&ad.然而；不过 (初中英语单词)
• director [di´rektə] n.指导者；....长；导演 (初中英语单词)
• scratch [skrætʃ] v.&n.抓，搔；抓伤 (初中英语单词)
• explanation [,eksplə´neiʃən] n.解释；说明；辩解 (初中英语单词)
• therefore [´ðeəfɔ:] ad.&conj.因此；所以 (初中英语单词)
• management [´mænidʒmənt] n.管理；处理；经营 (初中英语单词)
• actual [´æktʃuəl] a.现实的；实际的 (初中英语单词)
• meanwhile [´mi:n´wail] n.&ad.其间；同时 (初中英语单词)
• executive [ig´zekjutiv] a.行政的 n.行政官 (初中英语单词)
• appetite [´æpitait] n.欲望；食欲 (初中英语单词)
• houston [´hju:stən] n.休斯顿 (高中英语单词)
• commodity [kə´mɔditi] n.日用品；商品 (高中英语单词)
• phenomenon [fi´nɔminən] n.现象；奇迹；珍品 (高中英语单词)
• meager [´mi:gə] a.瘦的；贫弱的 (高中英语单词)
• typical [´tipikəl] a.典型的；象征的 (高中英语单词)
• crisis [´kraisis] n.转折点；危机 (高中英语单词)
• senior [´si:niə] a.年长的 n.前辈 (高中英语单词)
• trader [´treidə] n.商人；商船 (高中英语单词)
• ingredient [in´gri:diənt] n.(混合物的)成分 (高中英语单词)
• ending [´endiŋ] n.结尾，结局 (高中英语单词)
• revenue [´revinju:] n.税收；收入 (高中英语单词)
• billion [´biljən] num.万亿 (高中英语单词)
• so-called [´sou ´kɔ:ld] a.所谓的，号称的 (高中英语单词)
• technical [´teknikəl] a.技术的；专门性的 (高中英语单词)
• access [´ækses] n.接近；通路；进入 (高中英语单词)
• founder [´faundə] n.奠基者 v.陷落 (高中英语单词)
• overwhelm [,əuvə´welm] vt.压倒；淹没；打翻 (高中英语单词)
• magnitude [´mægnitju:d] n.宏大；重要性；大小 (英语四级单词)
• petroleum [pi´trəuliəm] n.石油 (英语四级单词)
• outlook [´autluk] n.眺望；景色；展望 (英语四级单词)
• dominant [´dɔminənt] a.统治的；占优势的 (英语四级单词)
• earnings [´ə:niŋz] n.收益；报酬；获得 (英语六级单词)
• breakdown [´breikdaun] n.崩溃；倒塌；损耗 (英语六级单词)
• holding [´həuldiŋ] n.保持，固定，存储 (英语六级单词)
• speculative [´spekjulətiv] a.臆测的；投机的 (英语六级单词)