JUST IN: Crude prices drop after Angola quits OPEC
Crude prices slumped on Thursday after Angola quit the OPEC oil cartel, while Wall Street stocks rebounded after a streak of records was snapped.
The price of the main international and US crude contracts dropped more than 1.5 percent after Angola said it was leaving as it did not want to go along with further production cuts that OPEC and 10 Russian-led allies agreed on last month.
They later pared their losses.
In an effort to prop up prices, the OPEC+ alliance has implemented supply cuts of more than five million barrels per day (bpd) since the end of 2022.
But oil prices still slid to their lowest levels in nearly six months following the latest OPEC+ decision. The United States has been pumping at record rates, as have Brazil and Guyana, while the weak global economy has raised concerns about demand.
ActivTrades analyst Ricardo Evangelista said the departure of Angola, a relatively small producer at 1.1 million barrel per day, would hurt OPEC less than if it had been a big producer such as Iraq.
But the timing could not be worse “when the cartel is working hard to convince its members to voluntarily reduce production in order to support prices”, Evangelista said.
Wall Street’s three main indices jumped at the start of trading, having tumbled on Wednesday and breaking the Dow’s streak of five straight record closes as a spate of profit-taking swept trading floors.
The blue-chip Dow stood 0.7 percent higher in late morning trading, while the broader S&P 500 rose 0.8 percent and the tech-heavy Nasdaq climbed 0.9 percent.
The rebound “suggests yesterday’s sell-off was the result more of esoteric trading behavior than everyone, en masse, suddenly agreeing that they should take some money off the table”, said Briefing.com analyst Patrick O’Hare.
US equities have driven higher since late October, following a nearly unbroken path as inflation moderated and the Federal Reserve flagged plans for 2024 interest rate cuts.
A stream of US data in recent weeks has shown inflation continues to slow and the jobs market is softening. Other economic indicators suggest the US central bank is on course to bring prices under control while averting a recession.
Data on Thursday showed first-time claims for jobless benefits held steady last week at a level far below that would indicate an impending recession.
The most recent Fed gathering ended with officials indicating they would cut about three times in 2024, sparking a buying frenzy in markets and forcing some policymakers to try to temper expectations.
Eyes are now on Friday’s upcoming release of the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, which could be key for its next meeting in January.
“A higher-than-expected core US inflation reading tomorrow could tip us back into fretting about rates being higher for longer,” said AJ Bell investment director Russ Mould.
European indices ended the day lower.
Asian indices struck a mixed note although Tokyo tumbled on troubling news from Japanese carmaker Toyota, whose share price tanked.
Tokyo shares slumped after the company announced a recall of a million vehicles, and its subsidiary Daihatsu decided to suspend shipments of all models over rigged safety tests.
Key figures around 1630 GMT
West Texas Intermediate: DOWN 0.6 percent at $73.78 per barrel
Brent North Sea crude: DOWN 0.5 percent at $79.29 per barrel
New York – Dow: UP 0.7 percent at 37,325.53 points
London – FTSE 100: DOWN 0.3 percent at 7,694.73 (close)
Paris – CAC 40: DOWN 0.2 percent at 7,571.40 (close)
Frankfurt – DAX: DOWN 0.3 percent at 16,687.42 (close)
EURO STOXX 50: DOWN 0.2 percent at 4,524.86 (close)
Tokyo – Nikkei 225: DOWN 1.6 percent at 33,140.47 (close)
Hong Kong – Hang Seng Index: FLAT at 16,621.13 (close)
Shanghai – Composite: UP 0.6 percent at 2,918.71 (close)
Euro/dollar: UP at $1.0994 from $1.0942 on Wednesday
Dollar/yen: DOWN at 142.11 yen from 143.57 yen
Pound/dollar: UP at $1.2664 from $1.2639
Euro/pound: UP at 86.81 pence from 86.57 pence
AFP
