Energy firms dive in Asia after oil collapse

Hong Kong, China | AFP | Friday 5/5/2017 – Energy firms were among the main losers in Asian trade on Friday following a plunge in oil prices fuelled by fresh global glut concerns with most equity markets heading for a negative end to the week.

While traders are looking ahead to the release of crucial US jobs data later in the day, the collapse in crude prices has dented optimism on trading floors with analysts warning about the possible effects on the economy.

Both main contracts tanked almost five percent Thursday on fears about increased production from the US, Libya and Nigeria, and the OPEC cartel’s commitment to extending an output cut beyond a six-month agreement.

Renewed weakness in China, an expected hike in US interest rates – which could make dollar-denominated oil more expensive to holders of other currencies – and signs of slowing demand have also contributed to the dive.

“OPEC has been looking down the barrel so to speak, of resurgent supply from Nigeria and Libya amongst OPEC and of course, American shale, which combined have completely offset the 1.8 million barrel a day production cut agreement,” said Jeffrey Halley, senior market analyst at OANDA, in a note.

“There was no light at the end of the tunnel for OPEC and non-OPEC producers… in fact, the light turned out to be the train coming the other way.”

While both contracts edged up slightly in Asia, they are now sitting at their lowest levels since OPEC and Russia agreed in November to cut back production in a bid to raise prices.

Their collapse Thursday sent Hong Kong-listed CNOOC skidding 1.6 percent and PetroChina tumbling 2.5 percent.

In Sydney, Woodside Petroleum lost more than two percent, Santos sank 2.6 percent and miner Rio Tinto lost 1.7 percent with tumbling metals prices also acting as a drag.

Among the region’s main indexes Hong Kong fell 0.8 percent, Shanghai shed 0.7 percent and Sydney slipped 0.5 percent, while Singapore retreated 0.2 percent. Taipei and Jakarta also suffered losses.

Investors are now keenly awaiting the release Friday of jobs figures for April, which will be closely watched for clues about the Federal Reserve’s plans for hiking interest rates.

The central bank is expecting to lift borrowing costs next month but with the oil price crisis returning policy makers could be more reticent owing to the possible impact on inflation.

Speeches by Fed boss Janet Yellen and several of the bank’s top officials will also be closely watched Friday.