Markets Update: Oil rallies following OPEC deal

Globally, oil rallied strongly in the wake of an agreement by the OPEC to reduce output for the first time in eight years, writes Ian Slattery, Zurich Life Assurance plc.

Ian Slattery

Oil rallied as reports indicated that the Organization of the Petroleum Exporting Countries (OPEC) had reached a tentative agreement to cap production. The news came as a surprise as talks were expected to stall on tensions between Iran and Saudi Arabia. Oil finished above $48/barrel and the deal (if completed) would represent the first output reduction for the group since 2008.

Equity markets started the week well on the back of good economic data but were reigned in on Deutsche Bank concerns.

The German institution continued to be the subject of intense speculation following the US Department of Justice’s proposed $14bn settlement in relation to misselling in the run up to the financial crisis.

However, market nervousness dissipated somewhat towards the end of the week on reports that negotiations were ongoing.

The global index closed down for the week, returning -0.2%. However, the dominant S&P 500 US market was positive for the week, returning 0.2% in dollar terms.

Oil was up over 8%, on the back of the aforementioned OPEC negotiations. Copper ticked up 0.4%, as both gold (-1.6%) and silver (-2.6%), had negative returns for the week.

The influential US 10-year bond yield moved down to close at 1.59% at the end of the week. In the eurozone, the German equivalent fell over the week from -0.08% to -0.12% as Deutsche Bank fears spurred some investors to safety.

Oil was up over 8%, on the back of OPEC negotiations

The spread between the German and Irish 10-year debt offering closed from 0.46% to 0.44%, as the Irish 10-year yield moved close to its record low. The euro/dollar exchange rate finished the week at $1.12/euro whilst the euro/sterling rate closed at £0.87/euro.