Energy firms lead sell-off in most Asian bourses

Energy firms led a sell-off in most Asian equity markets yesterday, a day after supply fears sent oil prices plunging, while confidence remains fragile owing to ongoing fears of a global trade war.

After hitting three-and-a-halfyear highs at the start of the month, crude has dropped almost 10% as it is hit by a perfect storm of issues that have fuelled fears of a glut.

Worries about the impact on demand caused by a possible trade war between the US and China took their toll last week, as did news that Libya was exporting again after recent oil field closures.

That all came just weeks after major producers Saudi Arabia, Russia and Opec agreed to lift a 2016 ceiling that had supported prices.

The latest spark for selling came on Monday on reports the US may tap its Strategic Petroleum Reserve to lower prices, and speculation Riyadh was considering increasing output for some Asian countries.

Also on Monday US Treasury Secretary Steven Mnuchin indicated the Trump administration could allow some exceptions to a ban on purchases of Iranian oil.

“It very much seems like a continued reaction to potential supply increases,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, told Bloomberg News. “The combination of the supply-side effect and the potential for less demand as a result of trade woes that we’re seeing are prompting people to take some of the long bets off oil right now.”

The losses filtered through to energy firms with CNOOC off more than 3% and PetroChina 2.8% down in Hong Kong, while Woodside Petroleum was more than 2% lower in Sydney and Tokyo-listed Inpex lost more than 1%.

Broader stock markets were also mostly down with Hong Kong 1.3% lower, Shanghai 0.6% off and Sydney 0.6% lower. There were also losses for Seoul, Wellington and Taipei. However, Tokyo — which was closed for a holiday Monday — ended 0.4% higher thanks to a weaker yen and Singapore edged up 0.1%.

Fears about a China-US trade war continue to nag investors, with both sides filing counter-complaints at the World Trade Organisation after recently imposing and threatening further tariffs on billions of dollars worth of goods.

And on Monday the International Monetary Fund warned about the effects of a stand-off between the world’s two economic superpowers. “The risk that current trade tensions escalate further — with adverse effects on confidence, asset prices, and investment — is the greatest near-term threat to global growth,” IMF chief economist Maurice Obstfeld said.

In Tokyo, the Nikkei 225 closed up 0.4% to 22,697.36 points; Hong Kong — Hang Seng fell 1.3% to 28,181.68 points and Shanghai — Composite closed down 0.6% to 2,798.31 points yesterday.