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.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.