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Asia Markets Fall After Oil Production Deal Collapses Oil Prices Regain Deepest Losses After Deal to Freeze Production Fails
(about 3 hours later)
HONG KONG — Oil plunged and markets across Asia slid on Monday after officials from oil-producing nations failed to agree over the weekend in Doha, Qatar, on the freezing of production. LONDON — Oil prices plunged in Asian trading on Monday before recovering somewhat in Europe, as investors and traders responded to the weekend failure by oil-producing nations to agree on a production freeze.
The meetings, which included officials from most of the Organization of the Petroleum Exporting Countries and Russia, were supposed to calm markets and show that Russia and Saudi Arabia were cooperating. But the talks faltered, partly because Saudi Arabia wanted Iran to participate in the freeze. Iran has rapidly increased production since sanctions on its nuclear program were removed. It has so far refused to cap production. Analysts said that any disappointment over a production deal at Sunday’s meeting in Doha, Qatar, was being offset somewhat by an energy workers’ strike in Kuwait that could crimp global oil supplies.
West Texas Intermediate dropped almost 6 percent to below $38 a barrel in early Asia trading, but it pared losses and hit $39.06 a barrel by midday in Europe. The Doha meeting included officials from most of the Organization of the Petroleum Exporting Countries as well as Russia. It was supposed to calm markets and show that Russia and Saudi Arabia — two major producers — were cooperating. But the talks faltered, partly because Saudi Arabia wanted Iran to participate in the freeze.
Markets slumped across Asia on Monday. Concerns about the effect of a recent earthquake weighed on the Nikkei 225 in Japan, which closed 3.4 percent lower, while the Hang Seng index in Hong Kong finished down about 0.7 percent. In mainland China, stocks closed down 1.3 percent in Shenzhen and 1.4 percent in Shanghai. The S.&P./ASX 200 in Australia was battered earlier in the day and closed down 0.4 percent. The breakdown undermined hopes of even a limited output freeze that might help oil prices rise. Yet since many oil-producing countries, including Saudi Arabia and Russia, are pumping flat out, a freeze agreement might have been more a signal that petroleum producers were willing and able to cooperate than having any real impact on the global oil glut.
The decline in oil prices could affect equities, which have recently tended to rise and fall with oil prices, in other regions, and futures indicated that markets in Europe and the United States were likely to open lower. But European stock markets were largely flat by midday. “The main message is that OPEC is not united and, in particular, there is a big divide between Saudi Arabia and Iran,” Kevin Norrish, the head of commodities research for Barclays, said in a telephone interview on Monday. “The fact that we got nothing at all,” he said, “was not a likely outcome for most people going into this meeting.”
Prices for West Texas intermediate and Brent crude, two global benchmarks, dropped almost 7 percent in early trading in Asia, before paring their losses. By early afternoon in London, both were still off by more than 4 percent, with West Texas crude at $38.58 a barrel and Brent crude at $41.50 a barrel.
European stock markets were down only slightly, which analysts attributed to the Doha meeting and to the strike in Kuwait, which appears to have substantially cut into the oil producing country’s output. Kuwait is the fourth-largest producer among OPEC’s 13 members, according to data published by the group.
But energy stocks in Europe nevertheless fell sharply. Shares in the French energy giant Total fell as much as 4.7 percent, while its British counterpart BP had its stock price decline 3.9 percent at one point. Both later recovered, but they were still down for the day.
“It’s quite tricky,” Mr. Norrish said. “You’re balancing off the disappointment” of the Doha meeting ending without an agreement, with the lost production in Kuwait.
“It shows the market is very uncertain how to interpret these different bits of news and fit them together,” he said.
It is unclear how long the strike, by thousands of Kuwaiti oil and gas workers protesting a government plan to overhaul public-sector salaries, will last, the news agency Reuters said.
Saad al-Azmi, a spokesman for the Kuwait Oil Company, wrote in a post on the state-owned firm’s Twitter account on Sunday that production had been cut to 1.1 million barrels of oil a day, according to Reuters. That would be slightly less than half of normal daily output for Kuwait.