Energy companies drove an auction in most Asian value advertises on Tuesday daily after supply fears sent oil prices diving, causing Asian markets hitting down while certainty stays delicately inferable from progressing fears of a worldwide trade war.
In the wake of hitting three-and-a-half-year highs toward the beginning of the month, rough has dropped very nearly 10 for every penny as it is hit by an ideal tempest of issues that have fuelled fears of glut in supplies.
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 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.
Moreover, 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.
“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.”
In the wake of IMF trade warning
The losses cut through to energy firms with CNOOC and PetroChina down more than three per cent in Hong Kong, while Woodside Petroleum was more than two per cent off in Sydney and Tokyo-listed Inpex lost more than one per cent.
Broader stock markets were also mostly down with Hong Kong 1.1 per cent lower, Shanghai one percent off and Sydney 0.4 per cent lower. There were also losses for Seoul, Wellington, Taipei and Singapore.
However, Tokyo — which was closed for a holiday Monday — rose 0.6 pe rcent by the break thanks to a weaker yen.
Ongoing fears about a China-US trade war continue to nag investors, with both sides filing counter-complaints at the World Trade Organization 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.
Attention is now on the start of the corporate earnings season, with hopes strong reports will deflect from the trade war, while Federal Reserve chief Jerome Powell is to give two days of congressional testimony from Tuesday.