Oil market begins to rebalance

Oil prices remain historically depressed, but they have perked up a little this week.

Are slumping oil prices a harbinger of doom for the stockmarket? Albert Edwards of Société Générale notes that weak commodities often serve as “a leading indicator” for other asset prices. Crashing oil demand suggests that the global economy is heading for a deep recession. Shares, another “cyclical risk asset” prone to recessionary plunges, could soon follow black gold south. 

Oil prices remain historically depressed. However, they enjoyed a strong start to the week, with US West Texas Intermediate, which turned negative last month, doubling over a week to trade above $23 a barrel and Brent rising through $29 a barrel to hit a three-week high. 

The easing of lockdowns in many places means that demand is slowly returning for the world’s favourite commodity, says David Hodari in The Wall Street Journal. Goldman Sachs analysts report that consumption is up by 2.5 million barrels per day since the nadir of early April. Yet things are far from normal. America’s oil storage problem, which caused April’s price crash, is still with us, says Caroline Bain of Capital Economics. We are not “out of the woods yet”. 

“There is nothing like low prices to cure low prices,” says Stephen Innes of AxiCorp. Global oil supply has been shrinking rapidly in the wake of last month’s market drama. US oil and gas companies have closed 384 platforms in the past seven weeks alone. There are “nascent signs” that the market is rebalancing. 

Recommended

The MoneyWeek portfolio of investment trusts – March 2023 update
Investment trust model portfolio

The MoneyWeek portfolio of investment trusts – March 2023 update

A decade ago we set up the MoneyWeek portfolio of investment trusts. It proved a success, says Andrew Van Sickle.
27 Mar 2023
Energy prices expected to fall in July - should you switch to a fixed energy tariff?
Energy

Energy prices expected to fall in July - should you switch to a fixed energy tariff?

Fixed energy deals are starting to make a comeback, with one major provider already offering it to existing customers - we look at how much they may c…
27 Mar 2023
State pension errors – women with husbands aged over 80 could be underpaid
State pensions

State pension errors – women with husbands aged over 80 could be underpaid

Some married women could be missing out on their full state pension, but the DWP has no plans to contact them directly. We explain how you can check i…
27 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023

Most Popular

Share tips of the week – 24 March
Investments

Share tips of the week – 24 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
24 Mar 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023