Sun, May 28, 2023

Stocks, OPEC+ and Record Oil Production Cut

Oil industry and the new agreement

Stocks in Asia fell on Monday as the Organization of the Petroleum Exporting Countries (OPEC) and allies reached an agreement.

In Japan, the Nikkei 225 dropped 2.33% to close at 19,043.40 as shares of FamilyMart fell 7.17%. At the same time, the Topix index dropped 1.69% to end its trading day at 1,405.91.

South Korea’s Kospi index, declined 1.88% to close at 1,825.76 as shares of chipmaker SK Hynix fell 3.21%.

Moreover, mainland Chinese stocks also suffered losses on Monday. The Shanghai Composite dropped 0.49% to about 2,783.05. In the meantime, the Shenzhen Composite fell 0.799% to around 1,707.46.

As a reminder, markets in Hong Kong and Australia were closed on Monday for Easter Monday.

Oil prices and stocksStocks, oil industry and new challenges

It is important to mention that OPEC and allies, collectively known as OPEC+ reached an agreement to reduce oil production by 9.7 million barrels per day. Interestingly, that is the largest output cut in history.

Let’s have a look at the oil prices. International benchmark Brent crude futures added 0.86% to $31.75 per barrel. Moreover, U.S. crude futures gained 1.76% to $23.85 per barrel. As can be seen from the oil prices, record oil production cut had a positive impact on the prices. However, this was not the case for the stocks on April 13.

Moreover, OPEC+ is hoping those nations outside of the group, such as U.S. Canada and Norway will follow the footsteps of OPEC and its allies. However, U.S. President Donald Trump has an interesting position regarding oil production. According to President Trump, market forces would naturally curb oil production.

The coronavirus pandemic created a lot for the oil industry. It is not surprising that major oil-producing countries have to adapt to the new reality. The number of confirmed cases surpassed 1.2 million. Coronavirus continues to affect market sentiment. It will take time to stabilize the situation.



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