Angola’s exit from the OPEC oil cartel caused a sharp decline in crude prices on Thursday, but Wall Street equities recovered after a record-breaking run of gains was broken.
Following Angola’s announcement last month that it was leaving OPEC due to disagreements over additional production restrictions, which the organization and ten Russian-led allies had agreed upon, the price of the major international and US crude contracts fell by more than 1.5 percent.
They later pared their losses.
Since the end of 2022, the OPEC+ coalition has reduced supplies by more than five million barrels per day (bpd) in an attempt to support prices.
However, in the wake of the most recent OPEC+ decision, oil prices continued to plummet to their lowest points in almost six months. While Guyana, Brazil, and the United States have all been pumping at record rates, worries about demand have been raised by the sluggish global economy.
The withdrawal of Angola, a relatively modest producer at 1.1 million barrel per day, would harm OPEC less than if it had been a large producer like Iraq, according to ActivTrades analyst Ricardo Evangelista.
However, Evangelista said that the timing is ideal, “as the cartel is working hard to convince its members to voluntarily reduce production in order to support prices.”
After falling on Wednesday and ending the Dow’s run of five consecutive record closing, Wall Street’s three major indices rose at the opening of trading. This was due to a wave of profit-taking that swept trading floors.
In late morning trade, the blue-chip Dow was up 0.7 percent, the tech-heavy Nasdaq was up 0.9 percent, and the wider S&P 500 was up 0.8 percent.
According to Briefing.com analyst Patrick O’Hare, the bounce “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.”
Since late October, US stocks have risen sharply, continuing a practically continuous trend that began when the Federal Reserve announced intentions to lower interest rates in 2024 and inflation started to decline.
Recent US data has demonstrated that the labor market is deteriorating and inflation is still declining. The US central bank appears to be on track to manage prices and prevent a recession, based on other economic data.
First-time claims for unemployment benefits remained stable last week at a level well below what would suggest an imminent recession, according to data released on Thursday.
Following their announcement at the end of the most recent Fed meeting that they will reduce around three times in 2024, authorities set up a buying frenzy in the markets and forced several policymakers to attempt to lower 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