Oil revival drives late market rally

The rebound in commodities stocks has hauled the FTSE higher this afternoon, marking a remarkable reversal of fortunes given the double-digit losses previously suffered this morning. 

Oil barrels
Source: Bloomberg

There is no doubt that the investment community see the likes of Glencore, BHP Billiton and Rio Tinto as a bargain over the long term, yet the continued deterioration in commodity and stock prices will mean that most investors stay away until something fundamentally changes in the sector.

Unfortunately, despite today’s rally, the likeliness is that it is driven by short-term speculation over long-term investment, with further selling seemingly just around the corner.

The FX markets have been dominated by US dollar weakness today, which is certainly welcome given the bullish effect it can have upon commodity prices.

However, with a possible rate hike around the corner, not many will be writing off the idea of another strong dollar rally in the lead up to the Federal Reserve meeting.

Crude inventories fell by the greatest amount since August in the week just gone, dropping by 3.6 million barrels.

Coming off the back of today’s US dollar weakness and a rebound in UK commodity stocks, this afternoon’s spike in crude prices is a welcome reprieve for indices that are following oil prices higher.

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