(CEP News) - Oil prices remain relatively strong despite U.S. equity markets dropping lower.

The Dow Jones Industrial Average dropped over 200 hitting new 13-year lows on Thursday but WTI crude has only dropped just over $2.00 and is hovering around $44 a barrel.

“I think what you are seeing is a big disconnect between markets,” said Rob Gigiel, a commodities trader at MF Global. “The question you have to ask you self is, ‘is the oil market a lagging indicator or a leading indicator.’ I think it’s a lagging indicator,” he said.

He pointed out that none of the news released today will help provide long term support for oil prices. U.S. equity markets appear to selling off after being disappointed that Chinese government officials did not announce any new stimulus spending.

Overnight, Chinese Premier Wen Jiabao spoke on the economy and made no mention of further stimulus plans, but pledged to deliver an 8% GDP growth rate in 2009.

“You can’t have a global economic collapse and expect oil prices to remain high,” said Gigiel. “I think the bulls are having their moment in the sun but it smells like a bear trap.”

Gigiel said it could be only a matter of time before oil prices drop even further.

Colin Cieszynski , Market Analyst, CMC Markets Canada, is more optimistic that modest moves in oil prices could lead to some stabilization. He pointed out that oil prices isn’t the only commodity that is hold some of its recent strength.

“Commodity markets appear to be reflecting anticipation that the global economy may be stabilizing more than equities,” he said. “For example, despite a big multi-day rally earlier this week, copper, which tends to be viewed as the closet market proxy for sentiment toward global economic conditions, has been holding in very well today dropping only marginally.”

WTI Crude oil is down $0.95 to $44.43 while ICE crude oil is trading down $1.24 to $44.88.

Meanwhile, ICE RBOB gasoline futures are up $6.22 to $138.16 and Globex natural gas is down $0.01 to $1.26. Heating oil at the ICE is up $3.49 to $121.45.

In the mining sector, spot gold is trading up $20.02 to $926.52 USD. In Canadian dollars, gold is up $37.96 to C$1191.90. Silver contracts at the CBOT are up $0.23 to $13.15.

Bloomberg’s index for base metals is down 2.49 points to 114.10. Wheat futures at the CBOT are down $8.25 to $514.75.

All data take at 1:10 p.m. EST

By Neils Christensen, neilsc@economicnews.ca

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Posted in Categories: Canada, Commodities, Economy, Eurozone, Releases, USA.

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