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Asian energy firms hit by tumble in oil prices

Jan 10 2017 07:29

Hong Kong - 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 on Monday as traders fret over Iraq's commitment to stick to output cuts agreed to much fanfare by Organisation of the Petroleum Exporting Countries and other key producers in November.

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 last February.

However, Iraq's oil minister said exports from its southern ports in the Gulf reached a record high in December, leading to suspicion it will not stick to the cuts, which came into effect on January 1.

"The Iraqi headlines have raised concerns about compliance," John Kilduff, a partner at New York-based hedge fund Again Capital, told Bloomberg News.

"We need to see compliance outside of Saudi Arabia, Kuwait and the other Gulf states."

While both contracts edged up slightly on Tuesday, regional energy firms tracked sharp losses in their US counterparts, with Sydney-listed Woodside Petroleum and BHP Billiton each down 1%.

Inpex lost 0.4% in Tokyo and PetroChina dived two percent in Hong Kong, where CNOOC was also down 1.5%.

The losses also weighed on some regional stock markets. Sydney shed 0.9% and Shanghai lost 0.3% while Seoul eased 0.2%.

However, Hong Kong added 0.3%, with investors welcoming data showing prices at China's factory gates had risen last month 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 at the weekend 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.

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