Asian energy firms sink as OPEC output deal disappoints
HONG KONG: Energy firms took a hit yesterday after crude prices plunged almost five per cent the previous day as traders were left disappointed by Organisation of Petroleum Exporting Countries’ (OPEC) 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 per cent and PetroChina lost 1.5 per cent in Hong Kong while Sydney-listed Woodside Petroleum sank 2.5 per cent and Rio Tinto was off 1.9 per cent.
Inpex dived more than two per cent 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 per cent against the greenback and the Canadian dollar down 0.5 per cent.
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 per cent down, while Hong Kong slipped 0.1 per cent and Sydney was off 0.7 per cent.
Singapore eased 0.4 per cent while Wellington and Taipei were also lower. — AFP