Any relief for consumers from the 25% fall in global oil prices since June was punctured by the OPEC+ decision on Monday to cut production by 100,000 barrels a day to bolster prices.
That saw Brent crude prices rise about 2.5% back above $US95 a barrel, while US West Texas Intermediate crude jumped 2.3% to $US88.87.
The news should see a pick up today in the share prices of leading Australian energy groups like Woodside, Santos and Beach which will also get a boost from another surge in European gas prices after Russia cut off supplies to western Europe.
The overnight futures market saw a small 8-point gain for the Share Price Index which points to a softish opening for the ASX 200 because of a lack of a lead from holidaying Wall Street.
Of more interest though for local investors will be the new record high for Australian thermal coal of $US465 a tonne on the Newcastle ICE market on Monday night. That was a gain of 10% on the day from Friday’s near record close of $US440 a tonne.
The gain will see investors chase local coal stocks like Terracom, Coronado, Yancoal and Whitehaven, not to mention BHP.
Thermal coal prices jumped after gas prices in Europe leapt 35% on Monday post the Russian cutoff, and as governments in Sweden and Finland bailed out power companies in the region because the rise in gas prices had pushed them to the edge of bankruptcy as demands for more collateral on futures contracts threatened to bankrupt the entire sector and send financial systems crashing.
Sweden and Finland put up close to $US25 billion in bailout finance, a move that also eased pressure on the Nasdaq clearing market in Stockholm which handles energy and other trades in the region. The US parent of the Stockholm exchange made it clear it supported the moves by the governments and said it stood ready to help.
OPEC and its allies, led by Russia, on Monday agreed a small output cut of 100,000 barrels a day.
They scheduled the next OPEC+ meeting for October 5 but the group said it could meet at any time to adjust production before that, essentially giving power to its Saudi chairman to address market developments whenever the need arises.
Reuters reported that this flexibility would extend beyond October.
“The members have trusted that the chairman can intervene whenever necessary to bring more stability and this can be beyond October until the end of the (OPEC+) agreement,” the source said.
OPEC has been watching the increasing weakness in oil prices in recent weeks and leader Saudi Arabia last month warned of the possibility of output cuts to offset what it sees as exaggerated oil price falls.
Monday’s cut represents only 0.1% of global demand and will be offset in coming weeks by rising output in the US which is now the global swing producer.
