Oil Prices Jump as Producers Cut Supply, Driving Up Global Stock Prices

Oil prices went up almost 6% on Monday after Saudi Arabia and other major oil producers said they would cut production by 1.15 million barrels per day from May until the end of the year. There was a mix of stocks in Asia.

In electronic trading on the New York Mercantile Exchange, the price of U.S. benchmark crude oil went up by $4.24, or 5.6%, to $79.91 per barrel. It went up $1.30 to $75.67 per barrel on Friday, before a meeting over the weekend where members of the so-called OPEC+ group of oil exporting countries decided to cut production.

This is in addition to a cut that was announced in October, which made the Biden administration very angry.

Brent crude, which is used to price oil around the world, went up by $4.35 per barrel, or 5.4%, to $84.24.

The tweet below confirms the price of Crude Oil:

Cutting oil production made prices go up right away, and it was expected that gas prices would also go up. This would add to the problems in many countries where high fuel prices are already a big problem. Higher oil prices will also make it harder for central banks to stop inflation from getting out of hand.

Clifford Bennett, the chief economist at ACY Securities, said in a report, “This will cause political waves across Europe and even higher general inflation in the US. This will put more pressure on the Federal Reserve to keep raising rates aggressively.”

Global Markets

European stocks started out higher. The DAX in Germany went up 0.2% to 15,665.63, while the CAC40 in Paris went up 0.5% to 7,356.77. The FTSE 100 in Britain went up 0.8% to 7,694.79.

The future for the S&P 500 went down by 0.2%, but the future for the Dow Jones Industrial Average went up by 0.3%.

In Asian trading, Tokyo’s Nikkei 225 index went up 0.5% to 28,188.15, even though a quarterly survey by the Bank of Japan showed that big Japanese manufacturers were less optimistic about their businesses in the first quarter of this year.

The main measure of the “Tankan” showed that positive sentiment dropped from 7 in December to 1 in March. This is the worst quarterly result since December 2020.

The Hang Seng in Hong Kong went up by 9 points to 20,409.18, and the Shanghai Composite index went up by 0.7% to 3,296.40. The Kospi fell 0.2% in South Korea, to 2,472.34.

The tweet below shows People’s reaction to Oil Cuts:

The S&P/ASX 200 in Australia went up 0.6% to 7,223.00. In Taiwan, shares went up, but in Bangkok, they went down a bit.

Last month, surveys of purchasing managers in emerging Asian markets went down because export orders went down. This is another sign that the global economy is getting weaker.

In a commentary, Shivaan Tandon of Capital Economics said, “Growth around the world is likely to stay slow over the next few quarters, which will keep pressure on manufacturing output in Asia.”

The S&P 500 rose 1.4% on Friday and 3.5% for the month. Tech stocks led the way for the week. The market went up on Friday after a report showed that inflation slowed in February, but was still high compared to the past. If inflation starts to slow down, the Federal Reserve might have more room to lower interest rates.

The Nasdaq composite went up 1.7%, while the Dow Jones Industrial Average went up 1.3%. The big jumps in tech stocks were the main reason why the Nasdaq rose 16.8% for the quarter.

High-interest rates can slow inflation, but they do so by slowing the economy as a whole. This makes the risk of a recession higher. They also make stock, bond, and other investment prices go down.

Expectations that the Fed will make things easier have helped Big Tech stocks because high-growth stocks are thought to benefit the most from lower rates. That has helped support the S&P 500, where Big Tech stocks have a big impact because they are so big.

Apple, Microsoft, and Alphabet, which is the parent company of Google, all had gains of more than 10% in March.

The second-and third-largest U.S. bank failures in history shook the markets after people rushed to get their money out of Silicon Valley Bank and Signature Bank. This made things harder for the Fed. Because of the runs, investors are looking at banks all over the world with a closer eye to find weak links.

The problems in the banking industry could also make interest rates go up if they cause banks to stop lending, which would slow hiring and growth in the economy.

In another trading on Monday, the U.S. dollar rose from 133.28 Japanese yen at the end of Friday to 133.50 Japanese yen. From $1.0844, the euro went up to $1.0848.

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