A settlement by oil-producing nations on Sunday to chop production by a record amount could sustain a recent bounce in stocks, though stay-at-home orders and closures associated with the coronavirus pandemic still weigh on the global economy.
OPEC+ agreed to chop oil output by a record amount – representing around 10% of global supply- to support oil costs during the pandemic, although sources said effective reductions might amount to up to 20%.
S&P futures ESC1 had been down Sunday evening, while U.S. crude futures and Brent opened higher before paring gains.
The deal could float oil prices over the longer term and lift stocks since negotiations between producers had hit roadblocks late last week, some analysts stated.
Oil prices have been slammed in recent days by concerns about demand due to virus-related bans, with U.S. crude ending Friday’s trade at $22.76, down 62.7% year-to-date.
Some analysts warned that some hopes of an agreement had already been factored into stock prices. The S&P 500 surged 12% last week, notching its best weekly gain since 1974.
Many experts believe that the scope of any rally – whether in oil or shares – will probably be limited by the coronavirus-related closures, which have slowed economic activity worldwide.