Energy stocks rally as oil prices jumped to one-year high
Margaret Yang, CFA, Market Analyst, CMC Markets SingaporeCrude oil prices rose to its one-year high after Russian President Putin and Saudi Arabia’s energy minster reached consensus on production freeze to support the oil price in an energy conference held in Istanbul.
OPEC members have just reached an agreement on curbing output in their earlier Algiers meeting a few weeks ago. Putin’s comment showed clear sign that another big oil producer would join the camp in freezing output, since a higher oil price obviously aligns with the national interests of those countries.
The surge in oil prices led to rally in energy stocks worldwide. US equities closed half a per cent higher, with the energy sector outperforming (+1.5%). Euro Stoxx 50 index climbed 1%, and this is also led by energy stocks running up 2%. The positive sentiment may spread over to Asian markets today. Singapore’s oil & gas sector and energy stocks may be lifted by the positive development in the outlook of oil prices.
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 Jingyi Pan, IG Market StrategistRussia's change in stance boosted the outlook for several markets, primarily oil and indirectly for equities.
One would recall that despite the optimism that flowed from the Algeria meeting, the market sentiment had been that substantial work is needed for a comprehensive deal towards limiting oil production.
Oil prices shot up overnight as Russia voiced their willingness to support the OPEC oil production freeze.
WTI prices touched a high of US$51.60/bbl, up from the sub-US$50/bbl trade at the start of the week. While we certainly cannot discount the collective impact from Russia and OPEC, November 30 may still be too early for the market to see a deal from a precedent perspective.
On production levels, it is also unlikely that we will see a cut from Russia, unlike their OPEC counterpart, Saudi Arabia. Russian Energy Minister Alexander Novak had stated that the country prefers a production freeze to a cut, limiting the impact of the agreement.
Equities received a lift from the higher oil prices coinciding with the start of the Q3 earnings season. S&P 500 index picked up 0.46% on Monday, led by the energy sector with 1.51% gains. As usual, we would expect the contagion effect to reach Asia, possibly reversing some of the losses seen in the Asian indices yesterday.
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