Oil prices fell sharply, and global stocks rebounded due to hopes that a rise in production could offset some supply disruptions caused mainly by sanctions against Russia’s output.
Brent crude oil fell as much as 17% or $22 to just below $106 per barrel. had risen to a 14-year high earlier this week, at $139, after the first mention of sanctions.
The United Arab Emirates, a member in good standing of the OPEC cartel said that it would support increased production and there are reports of similar comments by Iraq.
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The wholesale gas prices fell too. The UK’s price per therm for delivery to wholesale customers dropped 30% to 342p, down from 670p just two days ago.
The main reason for Britain’s current cost of living crisis is gas prices. However, they are still at levels that have prompted a sharp rise in the energy price cap. This has led to a number energy suppliers going bankrupt in recent months.
A drop in oil prices could help motorists, at least for the next few months. Latest daily figures showed that petrol hit new records.
Stock market investors also benefited from the fall, as they were less concerned about the effects of an inflation shock resulting from the war in Ukraine and the subsequent rise in oil prices from nickel.
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* First Lady Olena Zelenska opens a letter condemning Putin’s’mass killing of civilians’
Traders were reinvesting in shares that they had sold on Wednesday.
London’s FTSE 100 saw a 3.25% increase, or more than 200 point, which added approximately PS60bn in value to its constituent companies.
According to market watchers, the mood was partly driven by the “buy the dip” sentiment or what some refer to as a “dead cats bounce”.
Despite the rally not being enough to overcome the recent sell-offs, it was not the worst of the crisis. It came after a 3.92% gain in the FTSE 100’s 25 February.
Craig Erlam is OANDA’s senior market analyst. He said that “Perhaps what you are seeing is a hopeful rally and not one built on solid foundations.”
“I would be surprised if it lasts for a significant time, unless there is real progress towards a ceasefire or Russian expulsion.”
Germany’s Dax was another big winner Wednesday, with a 7.9% jump that was the largest one-day gain since the volatile period during the pandemic two year ago.
Due to Germany’s dependence on Russian energy supplies, the Dax has suffered most of Europe’s stock indices. It closed Tuesday in “bear market” territory with more than 20% lower than its previous peak.
Wall Street saw the S&P 500 rise more than 2 percentage points, while the tech-driven Nasdaq rose more than 3 percent.
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