You are here

Singapore shares close higher thanks to 5% jump in oil price after Opec agreement


A 5 per cent jump in oil to around US$47 per barrel and a rise - albeit modest - in the Dow futures on Thursday ensured that the Straits Times Index (STI) gained 25.56 points or 0.9 per cent at 2,883.57, about one point into the black for 2016.

Turnover however, remained weak at 1.5 billion units worth S$868 million; and excluding warrants, the advance-decline score was 239-144.

The surge in oil came after the Organisation of Petrol Exporting Counties (Opec) agreed to the outline of a deal that will cut production for the first time in eight years, surprising markets.

Not surprisingly, oil and gas stocks enjoyed gains, the likes of Ezion, Ezra, Vallianz, Loyz Energy and SembCorp Industries gaining in high volume. The FTSE ST Oil and Gas Index finished with a 3.5 per cent gain.

Bank of Singapore's chief economist Richard Jerram however, sounded a note of caution. In his note Limited Impact from OPEC Cuts, he noted that the amount of the proposed cut is small.

"The plan is to limit output to 32.5-33 million barrels per day, which is only slightly below the 33.2 million produced in August. Two years ago, Opec was pumping 31.5 million per day," said Mr Jerram. "Second, we are sceptical that an agreement to control output can hold as Opec has not agreed the details of production quotas for each country . .. Third, Opec is not as influential as it used to be. It has a 41 per cent market share - not much lower than a decade ago - but this is not enough to dominate the market now that shale production has increased the flexibility of supply."