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Oil prices surge, stocks dip

Joseph Oyekanmi



Oil prices surge, stocks dip

Oil prices surged on Monday as OPEC+ kept to its plan to not boost output further, while US and European stocks slumped amid worries over inflation and higher interest rates.

US oil prices soared to their highest level since November 2014 after OPEC and key allies — known as OPEC+ — decided to stick with their planned moderate increase next month, despite the recent surge in prices.

Meanwhile, the price of the main international contract, Brent oil, jumped above $82 a barrel before finishing at $81.26 a barrel.

“The decision by OPEC+ to add the expected 400,000 barrels per day in November triggered a market reaction, as traders are now more boldly coming out from their cautious positions and pricing in a confirmed, tighter supply market,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Some economists are worried that sustained oil prices of $80 per barrel could undermine the recovery of the global economy, already under strain from snags in supply chains.

“Producing nations, and namely OPEC+, have to be careful not to allow prices to inflate too much, otherwise we may see an adverse reaction that could negatively impact post-pandemic economic growth,” Tonhaugen said.

Gains in European equities evaporated and US stocks sank as oil prices continued to rise after the OPEC+ announcement.

Analysts pointed to higher yields in government bonds as a drag amid expectations for tightening monetary policy.

The tech-rich Nasdaq led the market lower, slumping 2.1 per cent as highflyers such as Amazon and Apple lost around two per cent or more.

Facebook sank nearly five per cent, weighed down by a major outage on its services as well as heightening scrutiny of its operations after whistleblower Frances Haugen told television news show “60 Minutes” the company repeatedly chose “profit over safety” in managing the omnipresent social media company.

In Asia, shares mostly rose, but Hong Kong sank on fears about troubled property giant China Evergrande, which suspended trading in its shares.

The crisis at Evergrande, which is drowning in a sea of debt worth more than $300 billion, has roiled markets in recent weeks on fears that its failure could spill over into the wider Chinese economy and possibly further.

The firm said in a statement that the halt in the trading of its shares was called, “pending the release by the company of an announcement containing inside information about a major transaction”.

The news came as reports said Hopson Development Holdings planned to buy a 51-per cent stake in its property services arm.

However, traders remain concerned Evergrande will miss payments on bond obligations, putting it in default.

Hong Kong stocks, already under pressure owing to concerns about China’s crackdown on a range of industries including tech firms and casinos, sank more than two per cent.

Tokyo fell 1.1 per cent — a sixth straight loss — while Taipei was also in negative territory. (AFP)

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