Crude oil rebounds on deal hopes

A bounce in oil has lifted BP and Shell, propelling the FTSE 100 into positive territory this morning after a recent spate of losses.

• Russia/Saudi truce hopes buoy oil prices.

• But demand crisis remains even if production is cut.

• Stocks edge higher, recovering from overnight lows.

Equities have risen slightly in Europe this morning, with a powerful bounce for BP and Shell keeping the FTSE 100 in positive territory. A surge in oil prices is the main event of the morning, as the beleaguered commodity stages a rally on hopes that some form of accord between Saudi Arabia and Russia might bring the ongoing supply battle to a close. But this is only half the problem – abundant supply has come at a time of anaemic demand, and cutting back even modestly on output still leaves the world awash with oil that it doesn’t need, want or have space for. Only a sizeable rebound in demand, and soon, could help provide a more durable solution, and that is not likely to develop in the near future, with lockdowns being extended in Europe and no sign that the rate of infection in the US has yet stabilised.

Equities have been under pressure over the past 48 hours, but for now are managing to hold the line. The same factors inhibiting oil demand will hit stock markets too, since we face months of poor figures both from an economic and corporate perspective. It will require a heroic effort to look beyond this to a time when the lockdowns are over and economic life is returning to some semblance of normality. But the ongoing drumbeat of dividend cancellations and scrapping of financial guidance for UK firms suggests that we have not even reached the end of the beginning, let alone the beginning of the end.

Ahead of the open, we expect the Dow to start at 21,262, up 319 points from Wednesday’s close.