HONG KONG: Oil prices plunged in Asia Monday, sending energy firms and regional stock markets tumbling after the collapse of talks among the world’s top oil producers intended to ease a global supply glut.
Hopes that the talks in Doha on Sunday would result in an output cap 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 the commodity and world 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 4.7 percent, or $1.91, at $38.45. And global benchmark Brent crude for June lost 4.4 percent, or $1.89, to $41.21.
Energy firms were the biggest losers Monday, with Sydney-listed mining giant BHP Billiton down three percent, Rio Tinto off 1.6 percent and Woodside Petroleum 1.4 percent off.
In Hong Kong China’s CNOOC lost more than three percent and PetroChina was off two percent. Inpex in Tokyo was three percent 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 majors 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 BMI Research, warned oil prices could fall 15
Tokyo’s Nikkei closed 3.4 percent lower, with earthquake worries 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 due to the quake.
However, analysts said the impact on automakers’ bottom lines should be relatively limited owing to lessons learned after the 2011 quake-tsunami disaster, even if operations were shuttered for several weeks.
Hong Kong was 1.4 percent lower in late afternoon, Shanghai ended down 1.4 percent and Sydney slipped 0.4 percent. Seoul sank 0.3 percent while Singapore was down 0.7 percent. AFP