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Asia energy firms sink with oil as Doha output talks fail

by April 18, 2016 General

Sydney-listed mining giant BHP Billiton leads biggest losers the energy firms, its stock plunging 3 per cent. — Reuters file picSydney-listed mining giant BHP Billiton leads biggest losers the energy firms, its stock plunging 3 per cent. — Reuters file picHONG KONG, April 18 — Oil prices plunged in Asia today, pushing energy firms and regional stock markets lower after the collapse of talks among the world’s top oil producers intended to ease a glut in global supply.

Hopes that the talks in Doha yesterday would result in a cap on output 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 per cent, or US$1.99, at US$38.37. Global benchmark Brent crude for June lost 4.6 per cent, or US$1.97, to US$41.13.

Energy firms were the biggest losers today, with Sydney-listed mining giant BHP Billiton down 3 per cent, Rio Tinto 1.6 per cent and Woodside Petroleum 1.4 per cent.

In Hong Kong, China’s CNOOC lost 1.6 per cent and PetroChina was off 1.9 per cent. Inpex in Tokyo was 3 per cent 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 major producers 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 at BMI Research, warned oil prices could fall 15 per cent.

Tokyo’s Nikkei closed 3.4 per cent lower, with earthquake worries also hitting sentiment.

Toyota, Sony and Honda each lost at least 4 per cent as their production lines on Japan’s southwestern island of Kyushu remained offline owing to the quake.

However, analysts said the impact on automakers’ bottom line 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 per cent lower, Shanghai closed down 1.4 per cent and Seoul sank 0.3 per cent. Singapore slipped 0.7 per cent.

Sydney fell 0.4 per cent, with market heavyweight Qantas sinking almost 11 per cent after it cut a planned expansion of domestic capacity.

News of failure of the Doha talks 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 per cent down against the dollar while Australia’s dollar — which also relies on commodity sales — shed 0.6 per cent. South Korea’s won, the Indonesian rupiah and Thai baht were all sharply lower.

In early European share trading London lost 1.1 per cent, Frankfurt shed 1.2 per cent and Paris eased 1.6 per cent.

Key figures around 0820 GMT

Tokyo – Nikkei 225: Down 3.4 per cent at 16,275.95 (close)

Shanghai – Composite: Down 1.4 per cent at 3,033.66 (close)

Hong Kong – Hang Seng: Down 0.7 per cent at 21,161.50 (close)

London – FTSE 100: Down 1.1 per cent at 6,274.86

Euro/dollar: Up at US$1.1300 from US$1.1284 on Friday

Dollar/yen: Down at 108.20 yen from 108.75

New York – Dow: Down: 0.2 per cent at 17,897.46 (close) — AFP