HONG KONG: Oil prices plunged in Asia Monday, pushing energy firms and regional stock markets lower after the collapse of talks among the world’s top oil producers intended to ease a global supply glut.
Hopes that the talks in Doha on Sunday would result in an output cap helped the black gold climb to 2016 highs last week, having approached 13-year lows just months ago.
However, Saudi Arabia’s decision to walk away after Iran refused to take part sent shockwaves through trading floors, fuelling fears of another rout in world commodity and stock markets.
After six hours of negotiations, the 18 producers concluded that they needed “more time” to reach an agreement, said Qatari Energy Minister Mohammed bin Saleh al-Sada.
US benchmark West Texas Intermediate for May delivery was down 4.9 percent, or $1.99, at $38.37. Global benchmark Brent crude for June lost 4.6 percent, or $1.97, to $41.13.
Energy firms were the biggest losers Monday, with Sydney-listed mining giant BHP Billiton down three percent, Rio Tinto off 1.6 percent and Woodside Petroleum 1.4 percent off.
In Hong Kong China’s CNOOC lost 1.6 percent and PetroChina was off 1.9 percent. Inpex in Tokyo was three percent lower.
While key producer Iran had said it was unwilling to freeze output having just resumed exports after years of Western sanctions there had been hopes that all other majors at the talks would hammer out a deal.
‘Spanner in the works’
However, analysts said Riyadh’s need to maintain its market share prevented it from going along with other participants at the meeting including Russia, Kuwait and Qatar.
“Despite many of the 18 oil producers believing the meeting in Doha was merely a rubber-stamp affair for an oil production freeze, Saudi Arabia managed to throw a spanner in the works,” said Angus Nicholson, an analyst at IG Markets.
He said dealers had been “heavily positioned for a deal to go through”.
Regional stock markets, which rallied last week on upbeat economic data out of China, turned negative.
Sanjeev Gupta, an oil and gas analyst at EY, told AFP the failure “revived price collapse fears, especially after Saudi Arabia hardened its stance and threatened to raise production quickly if no freeze deals were reached”.
And Peter Lee, an oil and gas analyst BMI Research, warned oil prices could fall 15 percent.
Tokyo’s Nikkei closed 3.4 percent lower, with earthquake worries also hitting sentiment.
Toyota, Sony and Honda each lost at least four percent as their production lines on Japan’s southwestern island of Kyushu remained offline due to the quake.
However, analysts said the impact on automakers’ bottom lines should be relatively limited owing to lessons learned after the 2011 quake-tsunami disaster, even if operations were shuttered for several weeks.
Hong Kong ended 0.7 percent lower, Shanghai closed down 1.4 percent and Seoul sank 0.3 percent while Singapore slipped 0.7 percent.
Sydney fell 0.4 percent, with market heavyweight Qantas sinking almost 11 percent after it cut a planned domestic capacity expansion.
News of the Doha talks failure led to a rush for safe investments, with the yen rallying against the dollar. Emerging-market currencies were also hit.
The oil-dependent Malaysian ringgit was 0.8 percent down against the dollar while Australia’s dollar which also relies on commodity sales shed 0.6 percent. South Korea’s won, the Indonesian rupiah and Thai baht were all sharply lower.
In early European share trading London lost 1.1 percent, Frankfurt shed 1.2 percent and Paris eased 1.6 percent.
Key figures around 0820 GMT
Tokyo – Nikkei 225: DOWN 3.4 percent at 16,275.95 (close)
Shanghai – Composite: DOWN 1.4 percent at 3,033.66 (close)
Hong Kong – Hang Seng: DOWN 0.7 percent at 21,161.50 (close)
London – FTSE 100: DOWN 1.1 percent at 6,274.86
Euro/dollar: UP at $1.1300 from $1.1284 on Friday
Dollar/yen: DOWN at 108.20 yen from 108.75
New York – Dow: DOWN: 0.2 percent at 17,897.46 (close)
Copyright AFP (Agence France-Presse), 2016
Courtesy : BRecorder