A meeting between OPEC members and their oil-producing allies on Friday resulted in an agreement to cut oil supply by 1.2 million barrels per day starting in January. The production cuts will include an 800,000 barrel per day cut by OPEC countries and a 400,000 barrel per day cut by non-OPEC oil producers. Oil prices spiked on Friday after news of the agreement. Brent prices were also supported on Monday by the shutdown of Libya’s El Sharara oilfield, though U.S. WTI futures were trading lower.
U.S. WTI futures were trading at $52.38 per barrel as of 3:15 p.m. HK/SIN on Monday, down 0.44 percent. Brent crude futures were up 0.28 percent to $61.84 per barrel. Despite the cuts, not all traders expected prices to be supported as OPEC expects, due to increasing production in the United States and President Donald Trump’s public acknowledgement that he prefers prices to be as low as possible. A downward global economic outlook may also reduce demand which would push prices lower. On Monday, Japan, the world’s third-largest economy and fourth-biggest oil consumer, reduced its third quarter GDP growth down from initial forecasts. The recent global stock plunge also has traders concerned about global economic growth in the coming year.
Stocks Continue Downward Spiral
Global stock markets tanked on Friday, with Wall Street’s benchmark indexes closing no less than 2 percent lower. The Nasdaq lead the losses, plunging 3.05 percent on the day. The S&P 500 and the Dow Jones Industrial Average slumped 2.33 percent and 2.24 percent respectively. The losses extended into Monday’s Asian trading session, with markets trading in a bloody sea of red. Australia’s ASX 200 was down 2.27 percent and Japan’s Nikkei 225 trailed closely behind, easing 2.12 percent. Hong Kong’s Hang Seng Index was down 1.32 percent while the Shenzhen Composite was 1.39 percent lower. The Shanghai Composite was 0.82 percent lower.
The losses were prompted by growing fears that rising tensions between Washington and Beijing could sabotage chances for a trade deal within the current 90day deadline. Weaker than expected data out in recent days from Japan, China and the United States also sent traders running away from the markets with no sign of if or when they’ll be returning.