Wednesday, February 28, 2024

Oil price hits 9-month high after Opec and Russia agree to increase supply

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Oil prices hit their highest level since March after major producers agreed to a cautious increase in production that allayed fears of oversupply.

Brent, the international benchmark, rose 1.4% to $ 49.39 per barrel. US marker West Texas Intermediate climbed a similar margin to $ 46.51.

Thursday night, Russia and Opec forged a deal to increase oil supply by 500,000 barrels per day from January, a quarter of what they had previously agreed.

“The price of oil is supported by technical factors” such as the supply deal and a weaker US dollar, said Monica Defend, head of research at fund manager Amundi.

“Developed markets remain in the grip of the second wave of the pandemic and this is translating into weak demand for travel,” she warned.

“We don’t expect to see oil at $ 55 until the second half of next year, because [coronavirus] vaccines can be widely distributed and planes are back in the skies. ”

A weaker dollar increases the prices of crude because it is cheaper for holders of other currencies to buy the product. But expectations of a recovery in oil prices after the pandemic vary widely, with Opec bullish on consumption while forecasts of oil producers and Airlines companies suggest that a peak in demand is near.

The dollar index, which measures the dollar against the currencies of trading partners, fell 0.1% on Friday morning, hovering around a two-and-a-half-year low.

London’s FTSE 100 index, which has a heavy weighting of oil producers, miners and commodities traders, was the best performer in Europe on Friday morning, rising 0.9 percent. The European stock benchmark Stoxx 600 added 0.3 percent while Germany’s Xetra Dax traded flat.

The FTSE All-World stock index rose another 0.1% on Friday to hit a record high while the MSCI Asia-Pacific equity index rose 0.7% to a new high.

This follows the latest signs of progress in talks among U.S. lawmakers over a second stimulus package for the world’s largest economy.

Mitch McConnell, the longest serving Republican in the US Senate, said Thursday that an agreement on a relief plan, over which Republicans and Democrats have been arguing for months, was “within reach”.

The positive mood towards reopening economies also pushed the price of New York-traded copper futures up 0.9% to $ 3,511 a tonne on Friday, the highest since October 2013.

On Wall Street, futures markets signaled that the S&P 500 stock index would open 0.3% higher while the Nasdaq 100 would add 0.4%.

This preceded the closely watched US non-farm payroll data for November. Economists polled by Reuters expected jobs figures to show employers added 469,000 jobs in November, up from 638,000 in October, as the second wave of coronavirus has torn up American states.

A lower-than-expected payroll figure could “put cracks in the narrative of economic recovery” in the stock markets, said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management.

However, a much higher than expected number could give a boost to transactions that predict increases in consumer prices in the United States, he added, with the sale of US Treasuries and the rise in prices of US Treasuries. securities protected against inflation.


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