Fall in oil prices and OPEC+ cuts: impact on financial markets and key interest rates

Fall in oil prices and OPEC+ cuts: impact on financial markets and key interest rates

According to a report by de.investing.com, Russia and Saudi Arabia have called on OPEC members to consistently implement the production cuts of a total of 2.2 million barrels per day (bpd) in the first quarter of 2023 recently recommended by the joint organization of oil producing countries. Despite reduced oil production, oil prices are plummeting. The North Sea variety fell below $74 yesterday, just 2.55% away from its summer lows. The US variety was even more volatile, with its price shooting up almost 40% and then falling by 26.59%. The Elliott Wave Theory suggests that the downtrend may be nearing its end.

Impact on the market and the financial industry

A significant increase in oil prices could affect rising stock prices and dampen hopes of further easing inflation and falling key interest rates. Yesterday's US labor market data does not indicate that the US Federal Reserve will be able to cut key interest rates as early as the first quarter of 2023. This could lead to a rise in bond market yields and a collapse in stock prices. Nevertheless, investors in the stock market did not allow themselves to be dissuaded from their course for long and were encouraged by the survey results from the University of Michigan, which showed a significant reduction in inflation expectations.

Conclusion

If there is an end to the price decline and a turnaround in the price of oil, this could mean the end of the “party” on the stock market. It is therefore advisable to continue to keep a close eye on the upside potential in the stock market and the downside potential in returns and to prepare for possible setbacks.