Global stock markets fell yesterday [Wednesday 30-Dec-2015] as oil prices slumped toward 11-year lows, sapping investors' appetite for risky assets on the penultimate trading day of 2015. Investors need to pay attention to specific issuers in oil production states so they’re not blindsided in 2016.
Stock markets rallied the previous day as oil prices rebounded on prospects for lower temperatures on both sides of the Atlantic. But on Wednesday benchmark Brent crude slid below $37 a barrel, with investors worried about slowing demand and high supplies.
Slumping oil prices have been a major driver of financial markets this year, hammering energy companies, lowering inflation expectations and reinforcing bets on loose monetary policy in Europe and a slow tightening in the United States.
As the price of crude falls for a second year, marking the steepest decline since the recession, the impact is cascading through the finances of states, cities and counties, in ways big and small. Once flush when production boomed, some governments in major energy producing regions are facing a new era of unwelcome austerity as wells are shut.
A global glut of crude has weighed on the market for more than a year. Oil prices are on course to fall by more than a third this year as big suppliers such as Saudi Arabia and Russia have continued pumping crude in a bid to defend their market share. Meanwhile, U.S. crude output has been resilient despite the low prices, and much of the excess has gone into storage.
Brent is under particular pressure after the recent US budget deal that lifted a ban on US oil exports and is expected to reduce the international benchmark's premium.
Who is benefiting from this situation?
Domestic customers in the UK through low petrol pump prices and heating oil, but it is only temporary as the oil price controls more than just a few filling stations.