Wednesday 21 February 2018

Daily Market Update: Oil price continues to fall as Brent crude reaches its lowest level in more than 11 years.


John Barry

Brent crude oil continued to fall yesterday reaching its lowest level in more than 11 years.

The commodity has lost a fifth of its value in the last month alone and a third since early October. The main reasons attributed to the move lower have been over supply and reduced consumption, primarily by China and emerging market economies. Data released over the weekend had showed that Saudi Arabia boosted crude exports in October to their highest level in four months. Saudi exports increased 3.6 percent from September to October to nearly 7.4 million barrels a day. Interestingly, the largest exporter of oil in the world increased its exports by 6.8 percent year on year despite the fact that prices fell 42 percent in that timeframe.

Post the elections at the weekend, investors sold Spanish bonds and stocks after an inconclusive general election. The conservative Popular Party (PP) fell well short of achieving a majority and the expectation is that talks to reach agreement on forming a new government could take weeks. For decades, the PP, led by the incumbent Primer Minister, and the Socialists (PSOE), had dominated Spanish politics, but an increase in support for the anti‐austerity Podermis party and the centrist Ciudadanos has considerably changed the political landscape, with the latter 2 parties winning a combined 34 per cent of the vote. The spread between the Spanish 10 year and the benchmark 10‐year German Bund widened to 130 basis points, the highest in over a month.

On the US stock markets, the financial stocks helped indexes to rebound after two days of losses which had seen the Dow Jones lose 621 points. The DJIA gained 123 points on the day to close at 17,251. It was a similar story on the broader based S&P 500, with the Index adding 0.8 percent on the day. Despite a record breaking opening for Star Wars that exceeded expectations, franchise owner Walt Disney’s stock fell for the third day in a row, largely as a result of some analyst sell recommendations and suggestions that the company may have overpaid for sports rights. Trading volumes are expected to be light this week with an early finish on Thursday and markets closed on Friday.

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