By Robb M. Stewart and Chao Deng
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Stocks in Australia finished sharply lower Friday, after the world’s biggest oil-producing nations rejected calls to cut output, sending crude prices into a tailspin and weakening Asian energy stocks.
Oil and gas exploration and production company Santos /zigman2/quotes/207349564/delayed AU:STO +2.64% tumbled 13%, while larger Woodside Petroleum /zigman2/quotes/203437212/delayed AU:WPL +1.07% lost 7.1%. Elsewhere in the sector, Oil Search /zigman2/quotes/204702973/delayed AU:OSH +2.96% gave up 5.9% and Origin Energy /zigman2/quotes/207944120/delayed AU:ORG +1.26% dropped 7%.
The 12-member Organization of the Petroleum Exporting Countries, which collectively pump around one-third of the world’s oil, agreed on Thursday to stick to a current target of pumping 30 million barrels a day, suggesting the cartel is bracing for lower prices, longer term. Oil prices have fallen more than 30% since the summer amid weak global demand and a glut of supply.
Ric Spooner, chief market analyst at CMC Markets in Sydney, said investors were pricing in the possibility of sustained weakness in oil prices and a scenario where supply capacity might persist for the next year or two. “It’s not unusual for markets to stay oversupplied for longer than expected. Consequently prices can fall further than many expect,” he said.
Falling crude prices also pressured Hong Kong. A gauge of Hong Kong-listed energy stocks fell 3.3%. Cnooc Ltd /zigman2/quotes/203421416/delayed HK:883 -0.35% was the worst hit of China’s major oil companies with a 5.5% loss.
Asian benchmarks finished mixed, however.
Stocks in Shanghai /zigman2/quotes/210598127/delayed CN:SHCOMP +1.77% outperformed, led by bank stocks. China Everbright Bank Co. Ltd. /zigman2/quotes/207472099/delayed CN:601818 +0.78% , Bank of Communications Co. Ltd. /zigman2/quotes/203442771/delayed HK:3328 +1.39% and China Citic Bank Corp. Ltd. /zigman2/quotes/205809997/delayed HK:998 +1.69% each rose by their 10% upper daily limit, amid expectations that China would soon launch a long-anticipated deposit insurance system. The Wall Street Journal reported that senior officials at the country’s central bank discussed details on Thursday for implementing the plan, which would pave the way for more banks to freely compete for depositors.
The Shanghai Composite Index jumped 2.0% to 2,682.83. The market has gained 7.9% this week, after China rate cuts last Friday.
In Tokyo, investors bought up shares of companies which use fuel intensively, such as airlines and shippers. Japan Airlines rose 5.3%, Kawasaki Kisen /zigman2/quotes/201857679/delayed JP:9107 -0.89% jumped 6.9%, and Fuji Heavy Industries /zigman2/quotes/203522406/delayed JP:7270 +1.09% gained 3.8%.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +2.32% ended up 1.2% at 17,459.85.