Chain Reaction – Rise in Oil Prices Sparks Stock Market Growth Worldwide

Oil prices in global markets surged by about 10 percent last week, moving away from the lowest levels in 12 years, but analysts are not sure that their downward trend has ended.

On the London market, the price of a barrel on Friday was $32.18, which is about 11 percent higher than a week earlier, after sliding to new lows not seen since 2003 in the middle of last week. In the U.S. market, the price of a barrel on Friday was $32.19, representing a weekly increase of 9.4 percent, and at one point during the week, it dipped below $27 for the first time in 12 years. On Friday alone, oil prices jumped about 10 percent, one of their largest daily increases ever, attributed by analysts to a cooling in parts of the U.S. and Europe, which should strengthen consumption. However, they warn that the rise in prices is partly due to a purely technical correction, after having fallen more than 20 percent since the beginning of the year.

In the last 18 months, since the downward trend began, oil prices have plummeted from over $100 to approximately $30 per barrel, and analysts are not sure that the downward trend has stopped as the underlying causes of their decline – excessive production and weakness in the global economy – remain present.

– I don’t think we have found the bottom yet because there are no clear technical and fundamental signals for that. Therefore, I believe this is just a technical correction after which prices will fall again, says Fawad Razaqzada, a technical analyst for Forex.com and City Index.

He warns of the ongoing weakness in demand due to the slowing growth of the global economy, primarily China, the world’s largest consumer of raw materials. On the other hand, production remains high as the world’s largest producers fail to agree on production cuts to support prices. Therefore, analysts continue to expect very volatile trading in oil markets. They also recall a similar movement in oil prices in August of last year, when prices jumped more than 25 percent in just three days. They then fluctuated quite a bit for several months before entering a downward trend again and plunging to the lowest levels in 12 years at the beginning of this year.

Thanks to the rise in oil prices and investors’ hopes for new stimulus measures from central banks, stock prices on global exchanges have increased. On the Tokyo Stock Exchange, the Nikkei index was up about 0.7 percent at 6:30 AM, while stock prices in South Korea, Singapore, Shanghai, Australia, and Hong Kong rose between 0.8 and 1.8 percent. A strong rise in stock prices on Wall Street on Friday, after oil prices surged about 10 percent, which is one of their largest daily jumps ever, positively influenced Asian markets.