The world needed a spike in oil prices like a hole in the head. Just as one of the pinch points in the global economy had started to ease, Saudi Arabia and its counterparts in OPEC have unveiled a surprise output cut.
Danni Hewson, head of financial analysis at AJ Bell, said:ย โThe decision by the oil producersโ cartel, unusually taken outside of any officially scheduled meeting, representsย aย flexing of its muscles and potentiallyย aย pre-emptive move as it anticipatesย aย drop-off in crude demand relating to the collapse of SVB and ensuing banking crisis.
โIt is this crisis which has helped box central banks in when it comes to their ability to control inflation as they have to think about their role in preserving financial stability too.
โRising oil prices imply higher costs of energy, transportation and other areas like plastic. The heavy exposure of the FTSE 100 to energy and resources stocks is looking like an attribute again as index heavyweights BP and Shell help lift the index. It is telling that the more domestic focused and diversified FTSE 250 is downย aย smidge on Monday.
โManufacturing PMI figures from the US later today and jobs numbers at the end of the week will be closely monitored as investors seek to work out what exactly the Federal Reserve is going to do when confronted with this mess.โ
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