Oil slides on report Opec looking to increase production
Crude oil prices slid to their lowest point since January on Monday following a report that Opec, the oil cartel, was considering increasing output and easing the pressure on global supplies.
Brent crude, the international benchmark, was down 5.2 per cent to $83.20. US marker West Texas also dropped 5 per cent, to $76.12, after the Wall Street Journal said Saudi Arabia and other countries were discussing an increase of up to half a million barrels a day.
Mark Haefele, chief investment officer at UBS Global Wealth Management, nonetheless expected Brent crude prices to return to $110 a barrel in 2023 as supply tightened and demand continued to rise.
“Opec is scaling back its production this month, with crude exports so far in November down more than 2mn barrels per day versus October,” Haefele said. The upcoming European ban on Russian crude could also limit output.
In equity markets, Wall Street’s benchmark S&P 500 opened 0.4 per cent lower in New York, while the tech-heavy Nasdaq Composite fell 0.5 per cent. In Europe the regional Stoxx Europe 600 was flat and London’s FTSE 100 gave up its gains to trade down 0.2 per cent.
The US dollar index, which tracks the currency against six others, added 0.7 per cent on Monday, extending last week’s rally, though the greenback remains down about 3.4 per cent for November.
Speculation that the greenback might have peaked in late September had been fuelled by October’s lower than expected US inflation figure and hopes that China may be about to relax its strict zero-Covid stance.
Investors were less optimistic on the latter this week, however, after provincial capitals Shijiazhuang and Guangzhou rolled out tougher Covid controls to limit cases. Hong Kong’s chief executive John Lee, meanwhile, tested positive just days after interacting with President Xi Jinping at the Asia-Pacific Economic Cooperation forum in Bangkok.
“The reopening rally [in China] was played way too quickly, that’s not going to come until the second quarter [of 2023] at least,” said Paul O’Connor, head of the UK-based multi-asset team at Janus Henderson. “China was an important catalyst for rallies in the past few weeks but investors are questioning whether they’ve been too optimistic.”
Hong Kong’s Hang Seng index fell 1.8 per cent, while China’s CSI 300 edged lower by 0.8 per cent. Elsewhere, Japan’s Topix rose 0.3 per cent and South Korea’s Kospi shed 1 per cent.
In government bond markets, the two-year Treasury yield fell 0.01 percentage points at 4.5 per cent, while the benchmark 10-year Treasury yield fell 0.04 percentage points to 3.77 per cent. Yields fall as prices rise.