Oil Climbs But Still Set For Weekly Loss Ahead Of OPEC+ Meeting

Published on
  • Brent crude oil rises to $93 a barrel but on track for a steep weekly loss
  • Departing Reckitt (LON:RKT) chief to take the helm at Starbucks (NASDAQ:SBUX)
  • Pound plummets to two-year low amid recession fears and Fed rises

Price Of Brent Crude Oil Rises

Brent crude oil has risen to $93 per barrel, but this is still a sharp contraction of recent pricing – and 30% off this year’s high. The value of the black stuff is slipping away because of tighter monetary policy and new Covid lockdowns in China, which has changed the demand profile.

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This comes at the same time as work being done on the Iran nuclear deal, which reduces concerns around supply. The market is likely to remain highly sensitive to next Monday’s OPEC+ deal, which will decide on production policy.

An about-turn in existing agreements is unlikely to be triggered, but it’s something to monitor nonetheless, with supply and demand concerns both rearing their heads, exactly where the market will settle is tough to predict. At least for consumers, the trajectory is currently a downwards one.

Laxman Narasimhan took the market by surprise yesterday as he announced he was stepping away from consumer giant Reckitt after only three years, and while the group’s in the midst of a substantial turnaround.

Such moves at this sort of juncture are rare, not least because it causes a great deal of uncertainty for shareholders. Having said the move was for an opportunity that would allow Narasimhan to relocate to the US, it has now been released that he will be heading up Starbucks.

While he can’t leave Reckitt with a “job well done” badge – it’s simply too soon to take credit for the strategy overhaul - the market has been sad to see Narasimhan go, with Reckitt shares falling over 5% by the end of yesterday.

Taking control of the Starbucks cockpit won’t be easy. The coffee giant has lagged the wider market and struggled with labour unrest in the US, as well as loss of trading in China because of lockdowns.

Steadying the ship of a well-known brand is something Narasimhan is well versed in – but selling coffee will require him to flex very different muscles to the ones used to sell Dettol during a pandemic.

British Pound Falls To A Two-Year Low

The pound has fallen to a two-year low against the dollar, falling 0.7% to $1.15. These rates haven’t been seen since the flash crash during the early days of the pandemic.

The sell off in British assets has been set off by soaring energy prices which have sparked fears of a prolonged recession.

At the same time, a further 75-basis point interest rate rise is expected from the US, which would throw a portion of cold water on the embers of some corners of industry.

The falling pound isn’t bad news for all areas of the market, especially for companies that make a large portion of revenue overseas, like some of the large banks.

A weak sterling is more of an import problem, and will hit the likes of retailers who are forced to source internationally.

They will have to pay higher prices, potentially pushing up the cost of goods sold in the UK further, which risks further fanning the flames of inflation.’’

Article by Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown