Crude prices drop after Angola quits Opec

The price of the main international and US crude contracts dropped more than 1.5% after Angola decided to quit Opec. (AP pic)

LONDON:

Crude prices slumped today 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% 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.

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 as the US has been pumping at record rates, as have Brazil and Guyana, while the weak global economy has raised concerns about demand.

Wall Street’s three main indices jumped at the open of trading, having tumbled yesterday and breaking the Dow’s streak of five straight record closes as a spate of profit-taking swept trading floors.

The blue-chip Dow climbed 0.6%, while the broader S&P 500 rose 0.7%t and the tech-heavy Nasdaq gained 1%.

The rebound “suggests yesterday’s sell-off was the result more of esoteric trading behaviour 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, while other economic indicators suggest the US central bank is on course to bring prices under control while averting a recession.

Data today 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 tomorrow’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 were lower in afternoon trading.

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 1430 GMT

West Texas Intermediate: DOWN 1.5% at US$73.08 per barrel

Brent North Sea crude: DOWN 1.5% at US$78.53 per barrel

New York – Dow: UP 0.6% at 37,309.14 points

London – FTSE 100: DOWN 0.4% at 7,684.23 points

Paris – CAC 40: DOWN 0.3% at 7,558.45 points

Frankfurt – DAX: DOWN 0.3% at 16,686.11 points

EURO STOXX 50: DOWN 0.3% at 4,519.51 points

Tokyo – Nikkei 225: DOWN 1.6% at 33,140.47 points (close)

Hong Kong – Hang Seng Index: FLAT at 16,621.13 points (close)

Shanghai – Composite: UP 0.6% at 2,918.71 points (close)

Euro/dollar: UP at US$1.0995 from US$1.0942 yesterday