Asian energy firms hit by tumble in oil prices
Asian energy firms were the big losers after a plunge in oil prices, while the pound ´s troubles mounted on worries about Britain ´s plans to leave the European Union.
Both main crude contracts sank almost four percent as traders fret over Iraq ´s commitment to stick to output cuts agreed to much fanfare by OPEC and other key producers in November last year.
The deal sent the cost of a barrel surging last month towards $60 on hopes the cuts could put a dent into a global glut that had sent prices to near 13-year lows in February 2016.
However, Iraq ´s oil minister said exports from its southern ports in the Gulf reached a record high in December 2016, leading to suspicion it will not stick to the cuts, which came into effect on January 1 this year.
“The Iraqi headlines have raised concerns about compliance,” according to John Kilduff, a partner at New York-based hedge fund Again Capital LLC.
“We need to see compliance outside of Saudi Arabia, Kuwait and the other Gulf states.” While both contracts edged up slightly, regional energy firms tracked sharp losses in their US counterparts, with Sydney-listed Woodside Petroleum and BHP Billiton each down one percent Inpex lost 0.4 percent in Tokyo and Petro-China dived two percent in Hong Kong, where CNOOC was also down 1.R percent.
The losses also weighed on some regional stock markets. Sydney shed 0.9 percent and Shanghai lost 0.3 percent while Seoul eased 0.2 percent.
However, Hong Kong added 0.3 percent, with investors welcoming data showing prices at China ´s factory gates had risen in December 2016 at their fastest pace in more than five years.
Tokyo ended the morning flat, having swung in and out of positive territory.
On currency markets the pound struggled at three-month lows against the dollar after British Prime Minister Theresa May said the country would have control over its borders after Brexit, suggesting she would be prepared to quit Europe´s single market to achieve it.
“The Brexit narrative has also contributed to market apprehension and added to souring global risk sentiment,” said Stephen Innes, senior trader at OANDA.
That unease has filtered through to other parts of the currency market, with the yen extending gains against the dollar as analysts say there is a fear the greenback ´s rally since Donald Trump ´s election may have been overdone.