Crude oil prices rebounded sharply Wednesday after plunging Monday, joining the surge in the U.S. stock market.
XThe rally came after Japan slipped to join stock markets in China and Germany, as well as the S&P 500 index and Nasdaq composite, in bear market territory.
But on Wednesday, the Dow Jones industrial average and S&P 500 soared 5%, while the Nasdaq leapt 5.8%.
U.S. crude oil prices jumped 8.6% to settle at $44.04 per barrel after plunging 6.7% on Christmas Eve. Brent crude oil prices shot up 7.9% to $54.47, after undercutting $50 overnight.
Igor Sechin, head of Russia's Rosneft and a close ally of President Vladimir Putin, said Wednesday that the drop in global crude oil prices was due to the Federal Reserve raising interest rates last week.
Exxon Mobil (XOM) shares jumped 4.8% on the stock market today. Fellow Dow Jones energy giant Chevron (CVX) shot up 6.3%. BP (BP) advanced 3.85%, Royal Dutch Shell (RDSA) climbed 4%, and EOG Resources (EOG), a big U.S. shale producer, gained 7.4%.
Crude Oil Prices Amid Global Economic Weakness
"The shock value of the price drop and the lack of confidence about the global economy will cause a sharp pullback in energy investment," Phil Flynn, senior market analyst at Price Futures Group, wrote in his daily Energy Report.
He expects big capital spending cuts in 2019.
Oil companies "will have no choice even if they believe that this price crash is overdone, because the shareholders will not take too kindly to them if they are wrong."
But if oil companies curb activity and the economy doesn't perform as badly as the stock market suggests, then Flynn warns that oil prices could spike in 2019.
OPEC Crude Oil Production Quotas
Earlier this month, OPEC and its allies led by Russia, agreed to curb crude oil production by 1.2 million barrels per day starting in January. But the lack of detail raised concerns that participants could fudge any commitments to cut.
Last week, OPEC Secretary-General Mohammad Barkindo reportedly wrote to members urging them to release their quotas in an effort to support crude oil prices.
But the release seems to be delayed.
The letter also states that countries will reduce production by 3.02% to meet the 1.2 million-barrel-per-day cut, up from the 2.5% agreed on during the meeting.
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The post Crude Oil Prices Soar, Erase Christmas Eve Rout Amid Broad Rally appeared first on Investor's Business Daily.
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