HONG KONG: Oil prices plunged in Asia Monday, sending energy firms tumbling after the collapse of talks among the world’s top oil producers to cap output and ease a global supply glut.
Hopes that the long-anticipated talks in Doha on Sunday would see the world’s biggest producers agree to a freeze had 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 owing to Iran’s refusal to take part sent shockwaves through trading floors, fuelling worries of another rout in the commodity and world markets.
After six hours of negotiations, the 18 producers concluded that they needed “more time” to reach an agreement, Qatari Energy Minister Mohammed bin Saleh al-Sada said.
US benchmark West Texas Intermediate for May delivery was down 4.56 percent, or $1.84, at $38.52.
And global benchmark Brent crude for June lost 4.06 percent, or $1.75, to $41.35.
Energy firms were the biggest losers Monday, with Sydney-listed mining giant BHP Billiton down almost three percent, Rio Tinto off more than one percent and Woodside Petroleum 1.5 percent off.
In Hong Kong China’s CNOOC lost more than three percent and PetroChina was off 2.3 percent. Inpex in Tokyo was 4.5 percent off and JX Holdings 2.5 percent down.
While key producer Iran had said it was unwilling to freeze output — having just renewed exports after years of Western nuclear-linked sanctions — there had been hope that all other majors at the talks would hammer out a deal.
‘Spanner in the works’
However, analysts said Riyadh’s need to maintain its market share of world sales 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 the back of upbeat economic data out of China, turned negative.
Sanjeev Gupta, an oil and gas analyst at EY, told Agence France-Presse 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 BMI Research, warned oil price losses could reach 15 percent.
Tokyo’s Nikkei dived three percent in the afternoon, with worries about the effects of another earthquake in southern Japan on the economy also hitting sentiment.
Toyota, Sony and Honda each lost at least four percent as their production lines on Japan’s southwestern island of Kyushu remained offline.
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 are shuttered for several weeks.
Hong Kong lost 1.2 percent by lunch, Shanghai shed 1.3 percent and Sydney slipped 0.3 percent. Seoul sank 0.5 percent while Singapore gave back 0.8 percent.
The news led to rush for safe investments, with the yen rallying against the dollar while emerging market currencies were also hit.
The oil-dependent Malaysian ringgit was one percent down against the dollar while Australia’s dollar — which also relies on commodity sales — shed 0.8 percent. South Korea’s won, the Indonesian rupiah and Thai baht were all sharply lower.
Key figures around 0420 GMT
Tokyo – Nikkei 225: DOWN 3.0 percent at 16,351.77
Shanghai – Composite: DOWN 1.3 percent at 3,037.80 (break)
Hong Kong – Hang Seng: DOWN 1.2 percent at 21,059.97 (break)
Euro/dollar: DOWN at $1.1281 from $1.1284 on Friday
Dollar/yen: DOWN at 107.92 yen from 108.75
New York – Dow: DOWN: 0.2 percent at 17,897.46 (close)
London – FTSE 100: DOWN 0.3 percent at 6,343.75 (close)