Asia energy firms under pressure on oil drop

Supply glut fears return following fresh drop in oil price

HONG KONG: Energy firms struggled again in Asian trade Thursday after a fresh plunge in oil prices as supply glut fears returned, while regional equities saw a mixed response to the previous day’s sell-off.

Both main crude contracts dived more than 2 percent Wednesday despite a bigger-thanforecast drop in US inventories, with analysts suggesting OPEC and Russia should announce further output cuts.

“The fact that oil is now falling on a bullish inventory number must be a red light for producers and traders alike,” said Jeffrey Halley, senior market analyst at OANDA.

“OPEC/non-OPEC must now confront the oil elephant in the room, increasing the overall production cut from its present levels. The other choice will be to let the market set the price, which may mean oil drops to a level that even the newly slimline US shale industry struggles to break even at.”

However, the crisis comes at a time of heightened tensions between OPEC kingpin Saudi Arabia and fellow members Iran and Qatar, leaving little chance of cooperation.

Crude edged lower in volatile Asian trade and is down around 25 percent from its January highs, sitting at levels not seen since August.

That has dug into energy firms for another day. In Hong Kong, Sinopec and PetroChina each slipped 0.4 percent. Inpex tumbled 1.5 percent in Tokyo, although Sydney-listed Woodside Petroleum edged up 0.1 percent on bargainbuying.

Broader markets began the day on a high but struggled toward the end of trade. Hong Kong finished 0.1 percent down, Sydney put on 0.7 percent while Singapore gained 0.4 percent and Seoul 0.5 percent.

Shanghai ended 0.3 percent down after Wednesday’s rally that was fueled by MSCI finally approving Chinese mainland-listed or A-shares for inclusion in its emerging markets index.

Tokyo was 0.1 percent lower, with Takata the standout loser. The airbag maker crashed 55 percent Thursday on fears it is headed for bankruptcy and plans to sell its assets to a US company.

The Tokyo-based company at the center of the global auto industry’s biggest-ever safety recall has tumbled for four straight days and its stock is now worth less than a quarter of its value just a week ago.

In currency trade the dollar was unable to break out against the pound and yen, despite Federal Reserve indications it will hike interest rates again this year.

In early European trade London slipped 0.4 percent.