Historically, prices of crude and rubber have moved in tandem as synthetic rubber is produced from crude oil. But over the last 12 months while the price of rubber (RSS-3 Bangkok) has gained 7 percent, the price of crude oil (WTI) has declined 9 percent.
Crude oil and rubber prices lost all correlation in July and August with the coefficient of correlation between the two currently near zero. Chart lines of the two commodities have crossed each other twice in the last three months instead of moving together.
Why The Mismatch in Returns
After a cyclical fall in production earlier in 2016, the price of rubber has increased and in July hit 12 month high.
Crude oil prices however continue to face pressure from weak global demand and excess supply, on account of Organization of Petroleum Exporting Countries maintaining production levels coupled with high U.S. crude inventories.
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