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Oil, Stock Prices Rise Monday

  • Jim Randle

Specialist James Sciulli, center, works with traders at his post on the floor of the New York Stock Exchange, Feb. 22, 2016. Stocks are jumping Monday as the price of oil surges, lifting energy stocks.

Specialist James Sciulli, center, works with traders at his post on the floor of the New York Stock Exchange, Feb. 22, 2016. Stocks are jumping Monday as the price of oil surges, lifting energy stocks.

Stock markets rebounded strongly Monday, as oil recovered some of the value it had lost as crude prices plunged 70 percent during the past year-and-a-half.

In New York, the Dow rose 1.4 percent and the S&P 500 advanced nearly 1.5 percent, while the NASDAQ gained 1.6 percent. Earlier in Europe, key indexes were up 1.5 percent or more. Asian shares advanced nine-tenths of a percent on key indexes in Japan and Hong Kong.

Reports in the financial press said investors reacted to a report that the number of active U.S. oil rigs declined. Fewer rigs could mean lower supplies and higher prices. Monday, the International Energy Agency predicted that production of U.S. oil from fracking or shale sources will fall by hundreds of thousands of barrels over the next couple of years as low oil prices discourage energy investments.

The IEA, however, also says without new investment to create new capacity, consumers could eventually see a sharp increase in prices. That is because rising demand is predicted to use up the current surplus of oil.

Oil market predictions

The IEA previously said oil markets could stabilize in late 2015, but now says that may not happen until 2017, and notes that oil price predictions are even more difficult than usual. The report says U.S. oil output could hit a record high of 14.2 million barrels a day by 2021.

FILE - U.S. oil prices crashed below $27 dollars a barrel on Wednesday for the first time since 2003, caught in a broad slump across world financial markets. Gas is $1.39 per gallon in North Plainfield, N.J., Jan. 20, 2016.

FILE - U.S. oil prices crashed below $27 dollars a barrel on Wednesday for the first time since 2003, caught in a broad slump across world financial markets. Gas is $1.39 per gallon in North Plainfield, N.J., Jan. 20, 2016.

The IEA is an organization of 29 oil importing nations and tracks energy trends, supplies and prices. The group's experts say demand for oil will decline in the short term, but then recover and grow between now and 2021. The IEA predicts the growth rate in the near future will be slower than the recent past.

Falling oil prices

Oil prices have been mostly falling recently and that has sparked a sharp decline in stock market prices, which Ben Bernanke, the former head of the U.S. central bank, says is surprising. Lower energy costs hurt energy companies, which make up a fraction of the economy; but, lower costs help a majority of firms, which Bernanke says seem likely to boost, rather than hurt, stock values.

In a new study published Monday, the former chairman of the U.S. Federal Reserve says the most likely explanation is that investors think falling oil prices are due to falling demand for all goods and services and a sign of economic weakness.

Falling oil prices recently prompted Standard and Poor's to cut the credit ratings of major oil producers Saudi Arabia and Russia, along with many companies in the global oil business.

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