London’s FTSE 100 is set for a low start to Thursday even though oil markets have been boosted by news of an OPEC production cut.
Brent crude gained 8% moving back just above US$50 (£39.87) per barrel, while West Texas Intermediary crude gained almost 10% to change hands above the psychologically important US$50 (£39.87) level.
“After months of prevarication yesterday’s OPEC deal did manage to generate a fairly decent rebound in oil prices, as they announced their first production cut since 2008.
“It must be noted though that the deal agreed will only return output back to levels last seen in the first half of this year at 32.5m barrels a day, a cut of 1.2m barrels, effective from 1st January 2017, for six months.
The analyst added: “Even accounting for the cuts announced yesterday these new levels will still be at the high end for daily output for OPEC production over the last ten year period, at a time when Russia is still pumping at record levels of 11m barrels a day and US shale producers are waiting on the sidelines to further increase their own output.
“Even though yesterday’s OPEC deal was good news for the energy sector the response of equity markets was slightly more nuanced, with US markets closing lower on the day, albeit having posted their best monthly performance since July, while European markets only managed to post modest daily gains, while closing lower on the month, as the divergence between Europe and US markets continued.”