Oil slips as glut worries eclipse Saudi-Iran tensions

Oil prices fell on Monday as worries about oversupply and weak economic data from China eclipsed escalating tensions between major oil producers Saudi Arabia and Iran. 

PHOTO: REUTERS

JAN 5, 20166:53 AM

[NEW YORK] Oil prices fell on Monday as worries about oversupply and weak economic data from China eclipsed escalating tensions between major oil producers Saudi Arabia and Iran.

US benchmark West Texas Intermediate for delivery in February fell 28 cents to US$36.76 a barrel on the New York .

Brent North Sea crude for February, the global benchmark for oil, slipped six cents to US$37.22 a barrel in London.

"Petroleum markets drew some initial support on the rising tensions between Saudi Arabia and Iran after Saudi Arabia executed a prominent Shiite cleric Saturday on a terrorism charge, triggering protests, and then a severing of diplomatic ties," said Tim Evans of Citi Futures.

"The immediate worry here is that the simmering longer-term tensions here could boil over into a more direct military confrontation that would put oil production and shipments from the region at risk," he said.

But early price gains fizzled as traders returned to focus on the prolonged global supply glut and another weak report on manufacturing in China, the world's largest energy consumer.

The standoff between Saudi Arabia and Iran poses "no real risk of any oil disruptions at this point and time," said Again Capital founding partner John Kilduff.

"The overall glut is just an immovable force at this point and time and nothing short of actual war will stop that," he added.

Citi's Evans pointed out that the Saudi-Iran tensions also made it "somewhat more difficult" for the 13-member Opec cartel to reach any agreement that could limit supplies.

Opec decided last month against cutting output levels to shore up crude prices, instead choosing to maintain market share faced with competition from North American shale oil output.

Mr Kilduff said that poor Chinese manufacturing data weighed on sentiment. Factory activity fell to its weakest level in a quarter of a century in December, the 10th straight month of sector contraction.

AFP

    
 

Global stocks begin 2016 with China growth hangover

Fresh evidence of China's economic slowdown sent world stock markets tumbling on Monday, with Europe and the United States following Asia sharply lower in a gloomy start to 2016. 

PHOTO: BLOOMBERG

JAN 5, 20166:40 AM

[NEW YORK] Fresh evidence of China's economic slowdown sent world stock markets tumbling on Monday, with Europe and the United States following Asia sharply lower in a gloomy start to 2016.

Shanghai equities plunged seven percent, leading an Asian retreat, as more weak factory data fanned fears about the health of the world's second-biggest economy.

In Europe, Frankfurt posted the heaviest losses, diving 4.3 per cent. Milan slumped 3.2 per cent and Paris shed 2.5 per cent.

London stocks lost 2.4 per cent, with China-exposed mining companies falling the heaviest.

Wall Street joined the sell-off, with the S&P 500 falling 1.5 per cent.

"It hasn't been a textbook start for 2016. It's in fact been one of the worst first trading days on record," said market analyst Jasper Lawler at CMC Markets UK.

"Markets have been swept up in a renewed fear that China's economic slowdown is picking up speed after surprisingly weak manufacturing data," he added.

The sell-off came as financial markets reopened after Friday's new year holiday.

London's top fallers were mining giants Anglo American, which tanked 7.2 percent, and Glencore which dropped 5.8 per cent, on demand fears in leading commodity consumer China.

In the US, some of the biggest equity winners from 2015 fell hard in a decline analysts attributed to profit taking. Amazon tumbled 5.8 per cent, Netflix 3.9 per cent and Priceline, Facebook and Google parent Alphabet all lost about 2.3 per cent.

Global markets were also spooked over the flare-up in tensions between Iran and Saudi Arabia.

Following angry protests over Saudi Arabia's execution Saturday of prominent Shi'ite cleric and activist Sheikh Nimr al-Nimr, Saudi Arabia and then Bahrain and Sudan severed relations with Iran, the main Shi'ite power.

Oil prices initially gained on the Saudi-Iran rift, but fizzled as traders returned to focus on the prolonged global supply glut and the weak China data.

"On the first trading day of 2016, the markets have got off to a shocking start," said analyst Manoj Ladwa at brokerage TJM Partners.

"The problems in the Middle East have taken a turn for the worse with the Saudi-Iran stand-off. And China has only added to the negative sentiment as their economy shows further signs of slowing," he told AFP.

Authorities in China suspended trading on its stock markets in the early afternoon after shares collapsed.

The drop in the CSI300 index - which covers the Shanghai and Shenzhen bourses - for the first time triggered an automatic early closure under a "circuit breaker" mechanism to curb volatility, after an earlier 15-minute trading halt had failed to stem the declines.

The sharp losses revived memories of the summer rout that saw Shanghai crash about 40 per cent and trillions of dollars wiped off valuations.

"This situation has gotten the market off to a very ugly start," said Peter Cardillo, chief market economist at First Standard Financial.

AFP

    
 

US: Stocks fall on China worries; Dow loses 1.6%

PHOTO: BLOOMBERG

JAN 5, 20166:45 AM

[NEW YORK] US stocks opened 2016 on a dreary note on Monday, falling sharply on worries about plunging Chinese equities and a brewing diplomatic crisis between Saudi Arabia and Iran.

The Dow Jones Industrial Average shed 276.09 points (1.58 per cent) at 17,148.94.

The broad-based S&P 500 fell 31.28 (1.53 per cent) to 2,012.66, while the tech-rich Nasdaq Composite Index dropped 104.32 (2.08 per cent) to 4,903.09.

The losses in the US came on the heels of bruising trading sessions in Asia and Europe after the Chinese stock market fell about seven percent on a poor report on manufacturing activity.

Analysts also pointed to concerns about the breakdown in relations between regional rivals Saudi Arabia and Iran following violent protests in Tehran against the Saudi execution of a prominent Shiite cleric and activist.

"This situation has gotten the market off to a very ugly start," said Peter Cardillo, chief market economist at First Standard Financial.

Adding to the bad news was a report from the Institute for Supply Management showing US manufacturing activity contracted in December for the second straight month.

Some of the biggest equity winners from 2015 fell hard in a decline analysts attributed to profit-taking. Amazon tumbled 5.8 per cent, Netflix 3.9 per cent and Priceline, Facebook and Google parent Alphabet all around 2.3 per cent.

US-traded Chinese stocks were in retreat, including Alibaba and Baidu, which sank 5.6 per cent and 2.7 per cent, respectively.

However, retail stocks enjoyed an up day. Wal-Mart Stores added 0.3, per cent, Macy's 2.3 per cent, Target 1.3 per cent and Best Buy 0.7 per cent.

Pharma company Baxalta climbed 5.5 per cent on reports it is in advanced talks to be acquired by Shire for about US$32 billion.

Tesla Motors tumbled 6.9 per cent as it announced it shipped 17,400 cars in the fourth quarter, near the low end of the company's projected 17,000-19,000 range.

AFP