There is correlation between oil price and stock market. This correlation was evident several times in the last years. There are three reasons to take a look at this correlation.
- When oil prices fall, oil stocks fall. This puts pressure on the stock market.
- Right there is supply of oil. However if the past is any indication and if oil prices continue to fall, economists will start questioning the demand. Lower demand means lower global growth. The current stock rally has an underlying assumption of stronger global growth.
- Part of the current rally is based on an inflation hypothesis to pick up and therefore have been buying commodity stocks.
TOTAL OPEC PRODUCTION: