Energy firms lead Asia markets down after oil plunge, dollar up
HONG KONG: Energy firms led a broad sell-off in Asian markets on Thursday following a 5 percent plunge in oil prices, but the dollar held on to gains after a surprisingly strong US jobs report.
Wall Street suffered another loss after a closely watched report showed a shock surge in US oil inventories that rekindled worries about a global supply glut that has hammered the crude market since mid-2014.
The Energy Department revealed a whopping 8 million barrel increase in supplies over the past week — four times more than expected — owing to higher domestic production and increased stockpiling.
The news battered the oil market, with both main contracts slumping more than 5 percent to lows not seen since the end of last year.
Jeffrey Halley, senior market analyst at OANDA, said the report was the “straw that broke the camel’s back,” with concerns already abound that Russia was not pulling its weight on much-vaunted production cuts agreed between Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries in November.
And Greg McKenna, chief market strategist at AxiTrader, said there is growing unease that too much of the burden on reducing output is being shouldered by OPEC nations, particularly kingpin Saudi Arabia.
While oil edged back up Thursday, Asian energy firms took the heat. Japan’s Inpex shed 1.2 percent, Hong Kong-listed PetroChina and CNOOC were each more than 2 percent down and Woodside Petroleum dived 1.1 percent in Sydney.
That in turn hit wider markets, with Hong Kong down more than 1 percent in the afternoon and Shanghai 0.7 percent off at the close. Traders brushed off another jump in China’s factory gate prices that indicate a return to inflation in the country, with consumer inflation continuing struggle.
Sydney fell 0.3 percent and Seoul was 0.2 percent off and Singapore slipped 0.9 percent. Taipei dived 1 percent.
“The data catalyzed a new wave of glut concerns as the higher oil price might spur North American’s production, especially of shale oil, which may ultimately counterbalance OPEC’s effort to support oil prices,” said CMC Markets analyst Margaret Yang.
The oil figures overshadowed a surprise jump in private jobs creation in the US, which beefed up expectations for Friday’s key government jobs report and reinforced expectations the Federal Reserve will hike interest rates next week.
That in turn fired a rally in the dollar, which peaked close to 115 yen on Wednesday before paring the gains, with traders still uncertain as President Donald Trump has provided little detail on his plans to ramp up infrastructure spending and cut taxes.
The dollar advance on the yen provided the region with one of its only advances as Tokyo added 0.3 percent to end a four-day losing streak.
Also acting as a weight on further dollar gains are concerns about upcoming elections in France and the Netherlands as well as geopolitical crises including North Korea’s recent missile test.
The euro dipped ahead of a closely watched policy meeting by the European Central Bank later in the day.