LONDON — Oil prices climbed Wednesday as
OPEC and Russia-led allies announced a major cut in output, while a stocks
rally ran out of gas.
اضافة اعلان
The pound, meanwhile, continued to suffer against
the dollar over fears for Britain’s recession-threatened economy, falling
around two percent to slide under $1.13.
In Vienna, ministers from the 13-nation OPEC cartel
and its 10 Russian-led allies agreed to reduce two million barrels per day from
November.
It is the biggest cut since the height of the
COVID-19 pandemic in 2020, and came despite concerns it could fuel inflation
further and push central banks to further hike interest rates and therefore
increase the chances of a global recession.
Oil prices had slid back to their levels before the
war in Ukraine in recent weeks on concerns of a global slowdown, but have
surged in recent days on expectations of the production cut.
The main international crude contract, Brent, jumped
two percent following the decision.
“Oil futures are expected to continue their rally in
the short and medium term, but continued concerns over a global recession and
rising inflation are likely to limit the long-term upside,” said Srijan Katyal,
Global Head of Strategy and Trading Services at the international brokerage
ADSS.
Swissquote analyst Ipek Ozkardeskaya warned that the
big cut could “backfire” on OPEC+ if investors fear that it will push inflation
higher and force central banks to hike interest rates so much that it will
trigger a recession.
“The higher the energy prices, the sharper the
central banks must kill demand to pull the prices lower,” she said before the
decision was announced.
“Therefore, a big cut in OPEC production could well
backfire, and trigger profit taking and fall in oil prices today,” she added.
Rally loses steam
Meanwhile, a stocks rally
triggered by disappointing US data on Monday that fueled hopes the
US Federal Reserve (Fed) could let up in its campaign of aggressive interest rate hikes to
tame inflation has petered out.
European stocks finished lower across the board, and
Wall Street’s main indices were down sharply in late morning trading.
“Market participants are being forced to contend
with the possibility that the Fed won’t acquiesce to the stock market’s hopeful
wishes,” said analyst Patrick O’Hare at Briefing.com.
In currency trading, the pound took another beating
as a speech by British Prime Minister Liz Truss failed to reassure investors
about her controversial fiscal plans.
“As Prime Minister Liz Truss took to the stage to
try and shore up her support among her party and the country, the pound fell
further back and government borrowing costs rose slightly,” said market analyst
Susannah Streeter at Hargreaves Lansdown brokerage.
“The speech will do little to quell dissent over
worries that public services will bear the brunt of the tax cuts plans” she
added.
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