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Energy firms took a hit on Friday after crude prices plunged almost five percent the previous day as traders were left disappointed by OPEC’s latest output cuts.
Keenly awaited talks between the bloc and Russia ended Thursday with news that a deal to reduce output for six months until the end of June would be increased by another nine months in a bid to address an ongoing supply glut and support prices.
However, there had been hopes that the flagged extension would be 12 months or that the cuts would be deeper, fuelling a rally in crude prices.
The final decision sent both main oil contracts plunging Thursday, which in turn dragged energy firms lower.
David Lennox, resource analyst at Sydney-based Fat Prophets, told AFP: “The market obviously for some reason closer to the OPEC meeting started to factor in that there would be a cut in production, that OPEC would announce a cut in their ceiling of 32.5 million barrels.
“I am not sure how that came about, because with OPEC the rhetoric was just whether or not to extend the time period.”
While oil prices edged up slightly in Asian trade, energy plays took a hit. CNOOC fell 1.3 percent and PetroChina lost 1.5 percent in Hong Kong while Sydney-listed Woodside Petroleum sank 2.5 percent and Rio Tinto was off 1.9 percent. Inpex dived more than two percent in Tokyo.
?It?s the old market axiom — buy the rumour and sell the fact — that worked again for oil,? said Greg McKenna, chief market strategist at AxiTrader, said in a note.
Commodities-linked currencies were also lower, with the Australian dollar — already under pressure owing to fears over China’s slowing economy — diving 0.6 percent against the greenback and the Canadian dollar down 0.5 percent.
Asian stock markets were broadly weaker, despite another record close for the S&P 500 and Nasdaq on Wall Street that come on the back of upbeat US retail data.
Tokyo’s Nikkei ended the morning session 0.3 percent down, while Hong Kong slipped 0.1 percent and Sydney was off 0.7 percent. Singapore eased 0.4 percent while Wellington and Taipei were also lower.
However, Shanghai edged up 0.1 percent and Seoul added 0.4 percent.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.3 percent at 19,762.11 (break)
Hong Kong – Hang Seng: DOWN 0.1 at 25,611.68
Shanghai – Composite: UP 0.1 percent at 3,111.58
Euro/dollar: DOWN at $1.1195 from $1.1208 at 2100 GMT
Dollar/yen: DOWN at 111.56 yen from 111.85 yen
Pound/dollar: DOWN at $1.2882 from $1.2940
Oil – West Texas Intermediate: UP three cents at $48.93 per barrel
Oil – Brent North Sea: UP 11 cents at $51.57
New York – Dow: UP 0.3 percent at 21,082.95 (close)
London – FTSE 100: UP 0.04 percent at 7,517.71 points (close)
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Asian markets rose Thursday as traders welcomed indications from the Federal Reserve that interest rates could rise next month, while oil prices rallied ahead of an expected extension to output cuts.
Minutes from the Fed’s May policy meeting showed board members thought that if jobs growth remains healthy with a rebound in investment and consumer spending then rates could rise “soon”, which many took to mean June.
While the economy has shown some signs of weakness, the bank still thinks its broad strength would justify winding down its balance sheet, essentially sucking cash out of the system and putting upward pressure on borrowing costs.
The news helped propel Wall Street to a fifth-straight day of gains, with the S&P 500 hitting another record, as the sharp losses suffered last week wiped out.
Global markets tumbled in the middle of last week on fears that crises engulfing Donald Trump’s presidency could throw off-rail his big-spending, tax-cutting plan to boost the economy.
On Thursday the Nikkei in Tokyo ended the morning session 0.5 percent higher, while Hong Kong added 0.7 percent to put it on course for a fourth-straight gain. Sydney put on 0.2 percent.
Shanghai was up 0.1 percent as dealers brushed off a China ratings downgrade Wednesday by Moody’s.
Seoul jumped one percent to a fresh record high after the South Korean central bank kept interest rates on hold citing an improving economy. Singapore, Taipei and Wellington also posted gains.
Traders are now looking ahead to a meeting Thursday of the OPEC oil cartel at which it, along with key producer Russia, is expected to announce an extension of up to nine months — possibly 12 — to an output cut.
The agreement — which came into force on January 1 — sent prices surging when it was unveiled in November in a bid to address a global supply glut.
?The market is waiting for the outcome of the meeting; it?s clearly going to have an impact,? Michael McCarthy, a chief market strategist at CMC Markets in Sydney, told Bloomberg News.
?The agreement has been remarkable with the discipline showed by participants so far. In that respect, it?s been a success.?
Crude, which dipped slightly Wednesday on profit-taking despite a drop in US inventories, was up around one percent in Asia.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.5 percent at 19,849.10 (break)
Hong Kong – Hang Seng: UP 0.7 percent at 25,605.15
Shanghai – Composite: UP 0.1 percent at 3,067.85
Euro/dollar: UP to $1.1229 from $1.1216
Dollar/yen: UP to 111.54 yen from 111.52 yen
Pound/dollar: UP to $1.2975 from $1.2972
Oil – West Texas Intermediate: UP 49 cents at $51.85 per barrel
Oil – Brent North Sea: UP 56 cents to $54.52
New York – Dow: UP 0.4 percent at 21,012.42
London – FTSE 100: UP 0.4 percent at 7,514.90 (close)
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