Oil prices, on Monday, December 12, surged to an 18-month high after the world’s top crude producers agreed to the first joint output cut since 2001.
The gain in oil prices followed the weekend agreement between OPEC and key non-OPEC states.
Brent crude futures were up $1.76 at $56.09 per barrel, a 3.2% rise, after hitting a session peak of $57.89, the highest since July 2015. U.S. crude futures were up $1.73 at $53.24 a barrel, a 3.4% gain.
Yields also gained ahead of a two-day Federal Reserve policy meeting that starts on Tuesday, where the U.S. central bank is expected to raise interest rates for the only the second time since the global financial crisis.
There was particular surprise as Saudi Arabia, the world’s top producer, said it may cut its output even more than it had first suggested at an Organisation of the Petroleum Exporting Countries, OPEC, meeting just over a week ago.
Energy shares jumped, helping lift the Dow Jones industrial average and S&P 500 to record intraday highs in early trading on Monday. The S&P 500 spx later retreated, with consumer discretionary shares among the biggest drags.
The OPEC news and surge in oil prices were “good news for economic growth in the U.S. as well as Russia and others. But it will be to some extent tempered by a little bit of an impact on consumer spending,” said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, N.Y.
