Opec+ urges global cut to stem oil rout Financials drag down market

The Opec+ coalition is pressing other oil producers to join a deep reduction in global crude output and stem a historic price crash, as Russia's energy industry signalled it is ready to move.

Oil surged on the prospect that an idea first touted by US President Donald Trump on Thursday looked to be gaining some traction.

As the coronavirus decimates demand for crude, the impact of low prices is reverberating around the world--threatening the budgets and political stability of oil-dependent nations, the existence of the US shale industry, and jobs in an industry already in turmoil.

There are still massive obstacles to a deal: There's no indication that Trump will bow to Saudi demands that the US join the cartel in what would be an unprecedented global manoeuver. But Russia's oil industry is now ready to cut, people familiar with the situation said, and a meeting of Opec+ members that Saudi Arabia wanted has been hastily scheduled for Monday.

A global cut of 10 million barrels a day is a realistic goal, according to a delegate who spoke on condition of anonymity. That figure was first mentioned by Trump on Thursday as he called for a coordinated production cut. Yet the International Energy Agency, which advises major economies, signalled deeper curbs would be needed to stabilise the market.

A deal with non-Opec+ nations, including the US, would set a historic precedent. The Organization of Petroleum Exporting Countries has been managing supply since 1960, but its power has waned since the shale revolution turned the US from importer to major producer. IEA head Fatih Birol said Saudi should organise a G20 meet to address the glut.

So far, in the ground war, there is no sign of any movement toward a truce. Saudi Arabia is ramping up exports, as it promised to do.

But diplomatically it's a different picture. For several days, Saudi Arabia had been wrong-footed by Russia, as Moscow sounded open to talks and blamed the price collapse on the kingdom. Subsequently, by saying it's ready to cut, the kingdom put the onus on Moscow, forcing the latter to reverse its opposition to cuts.

—Bloomberg

The negative outlook given by foreign credit rating agencies Moody's and Fitch on the Indian economy, particularly the banking sector, led to heavy selling in bank and financial institution stocks on Friday, pulling down the Sensex by 674 points.

Nifty and Sensex closed lower for seventh straight week, recording a 33 per cent decline for the period.

The Sensex closed at 27590.95 points while the Nifty-50 closed down 170 points at 8083.80.

Analysts said institutional investors were moving to defensive sectors like pharma, FMCG from high beta sectors like bank, financials and IT.

The Nifty Bank Index fell 5.27 per cent, led by heavyweights. All the 12 stocks in the Nifty Bank closed in the red. Private banks were big losers on the NSE, led by RBL Bank (-15.50 per cent), Axis Bank (-8.85 per cent), IndusInd Bank (-8.33 per cent), ICICI Bank (-7.44 per cent), Bandhan Bank (6.52 per cent), HDFC Bank (-2.25 per cent) and Kotak Bank (-1.98 per cent). Among the public sector banks, SBI fell 5.66 per cent and Bank of Baroda -5.17 per cent. J&K Bank and Canara Bank fell 7.08 and 6.54 per cent, respectively.

The pharma sector stocks were big gainers on BSE led by Sun Pharma (9.42 per cent), Cipla (8.60 per cent), Lupin (13.05 per cent). Apollo Hospital also gained 9.25 per cent.