En­ergy stocks hit in Asia as oil sinks

The Myanmar Times - - International Business -

EN­ERGY firms sank in Asian trade yes­ter­day as oil prices ex­tended the pre­vi­ous day's sharp losses on prof­ittak­ing and fresh wor­ries about a global over­sup­ply.

Even a fall in the dol­lar was un­able to stop the slide af­ter Iraq flagged a pick-up in out­put and rebels in key pro­ducer Nige­ria an­nounced a cease­fire. In­vestors were also tread­ing wa­ter as they awaited a key speech from Fed­eral Re­serve boss Janet Yellen, hop­ing for some in­sight into the state of the US econ­omy and the bank's plans for its next in­ter­est rate hike.

Af­ter a seven-day rally that put oil into a bull mar­ket – a 20 per­cent jump from re­cent lows - the com­mod­ity has taken a hid­ing since the start of this week.

Yes­ter­day, West Texas In­ter­me­di­ate fell 0.9pc to US$47.00 and Brent lost 0.7pc to $48.84.

On Au­gust 22, WTI shed 2.9pc and Brent 3.4pc af­ter Iraq sig­nalled a likely in­crease in out­put from Kirkuk's oil fields un­der a deal be­tween the re­gion and the coun­try's new oil min­is­ter.

At the week­end the Niger Delta Avengers an­nounced a con­di­tional cease­fire and agreed to hold talks with the gov­ern­ment fol­low­ing months of at­tacks on key oil and gas fa­cil­i­ties.

The two de­vel­op­ments fol­low a surge that helped Brent last week break above $50 for the first time since early July and an­a­lysts warned of fur­ther drops.

“We’re see­ing a bit of profit-tak­ing,” Ric Spooner, chief an­a­lyst at CMC Mar­kets in Syd­ney, told Bloomberg News.

“It's about how far the price had climbed in re­la­tion to the cur­rent un­der­ly­ing fun­da­men­tal sit­u­a­tion. There is still plenty of sup­ply around. It wouldn’t be sur­pris­ing to see this down­trend con­tinue and it’s pos­si­ble we could see some sort of bas­ing around $44-$45.”

Among en­ergy firms, Ja­pan's In­pex and JX Hold­ings each fell more than 2pc, while in Hong Kong af­ter­noon trade CNOOC shed 1.5pc and Petro-China 1.1pc. Syd­ney-listed Wood­side Pe­tro­leum eased 0.4pc.

On re­gional stock mar­kets, Tokyo’s Nikkei fin­ished 0.6pc lower, while Hong Kong was flat. Shanghai added 0.2pc and Syd­ney closed 0.7pc higher while Seoul tacked on 0.4pc.

The dol­lar strug­gled to main­tain the Au­gust 22 rally de­spite week­end com­ments from Fed vice chair Stan­ley Fis­cher that fanned spec­u­la­tion a rise could come be­fore the end of the year. They were fol­lowed by sim­i­larly hawk­ish noises from two re­gional bank pres­i­dents.

The green­back fell to 99.94 yen at one point in Tokyo yes­ter­day. It later edged back to 100.07 yen from 100.32 yen in New York, while it was also down against most high-yield­ing cur­ren­cies in­clud­ing the Aus­tralian dol­lar and South Korean won.

Ob­servers ex­pect mar­kets to re­main cau­tious lead­ing up to Ms Yellen’s speech at the an­nual global cen­tral bankers’ sym­po­sium at Jack­son Hole in Wy­oming on Au­gust 26.

The speech “re­mains the head­line event this week and I think we could con­tinue to see an el­e­ment of cau­tion in the mar­kets in the lead-up to this”, Craig Er­lam, se­nior mar­ket an­a­lyst at OANDA, said in a note.

“In­vestors are still not buy­ing a 2016 rate hike. The only ques­tion is whether [Yellen will] strongly hint at a hike this year or in­di­cate that hold­ing off to early next year may be war­ranted.” –

‘It wouldn’t be sur­pris­ing to see this down­trend con­tinue’

Ric Spooner CMC Mar­kets

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