HONG KONG: Energy shares led a broad rally across Asian markets on Monday as oil prices were boosted by growing hopes that an OPEC-led output cut will be extended by another nine months.
With the deal agreed between the crude cartel and key producer Russia set to finish at the end of June, there had been worries that a global glut would resume once again, and send prices plunging.
But on Sunday Saudi Arabia’s energy minister Khalid al-Falih expressed confidence an extension to the agreement could be made, with eyes on a meeting Thursday between OPEC and Russia.
Saudi Arabia, the world’s biggest oil exporter, and Gulf members of OPEC are also fully behind the move, while there is “strong” commitment from Iraq and others, Falih said.
An agreement will come as a big relief to oil traders concerned about a pick-up in US shale production as well as increasing output from northern Africa.
Crude prices, which had already rallied about two percent Friday on hopes for a deal, built on the gains in Asia, in turn firing energy companies.
Hong Kong-listed CNOOC added 0.4 percent and PetroChina was 1.1 percent up, while Woodside Petroleum piled on 1.9 percent in Sydney with Rio Tinto up more than three percent. Japan’s Inpex rose more than one percent.
The advances helped drive gains in wider stock markets. Tokyo ended 0.5 percent higher, Hong Kong jumped 0.9 percent and Sydney added 0.8 percent.
Seoul was 0.7 percent higher while Taipei, Manila and Jakarta also climbed. However, Shanghai ended 0.5 percent down.
“The solid rise in oil and commodity markets helped lift prices and sentiment,” Greg McKenna, chief market strategist at AxiTrader, said.
US and European markets pressed higher Friday on bargain-buying. That followed sharp losses on worries about Donald Trump’s economy-boosting agenda with his presidency engulfed in a crisis over his firing of the head of the FBI and allegations he disclosed sensitive intelligence to Russian officials.
“The appointment of a special prosecutor to investigate the Russia question has relieved the pressure on markets and given some sense of certainty,” McKenna added. “The fact that the process is in hand has calmed tensions somewhat.”
Traders are keeping watch on the release of minutes from the Federal Reserve’s latest policy meeting, hoping for some clarity on its plans for hiking interest rates in light of recent disappointing US data while a number of board members will also be speaking.
In early European trade London rose 0.3 percent, while Paris and Frankfurt each added 0.2 percent.