Business and Finance
Oil hits four-year low amid fading expectations of OPEC cuts
(Reuters) – Fading hopes of a meaningful cut in production at Thursday’s OPEC meeting sent oil prices tumbling to a four-year low as Thanksgiving in the United States saw world stocks touch the brakes on their recent rally.
Gulf oil producers led by Saudi Arabia are expected to press the case at OPEC’s meeting in Vienna for holding off from output cuts, despite calls from some members for it to prop up prices that have crashed by a over a third since June.
OPEC sources have told Reuters action is unlikely and Brent oil dropped by more than $1.75 in Asian and early European trading to $75.95 a barrel, the lowest level since September 2010.
“The scene has been set by the Saudi comments going in to this meeting that market forces should be allowed to determine the price here,” said National Australia Bank strategist Gavin Friend.
“I think in terms of the big global economy picture, a lower oil price is a force for the good and the meeting today is really about whether we get an extension of the move or whether we get a reversal.”
Europe’s stock markets had a steady start, buoyed by Wednesday’s signal from the European Central Bank that it is edging closer to government bond buying and by another record finish for Wall Street’s S&P 500.
A larger than expected fall in Spain’s consumer price index, where deflation is taking hold, and weak readings from the first German state surveys added to bets that overall euro zone inflation will show a further decline on Friday.
Pressure is rising on the ECB to take more aggressive action to tackle the situation. Speaking in Finland, ECB head Mario Draghi said the bloc needs a “comprehensive strategy” including reforms by governments to get it back on track.
Spain’s weak CPI survey drove the euro to a session low against the dollar, but most of the currency market action was centered around the slide in oil.
Oil-rich Norway’s crown hit a three-week trough of 8.5693 crowns per euro, Russia’s rouble took another dive and Nigeria’s naira was still licking its wounds after an 8 percent devaluation on Tuesday.
The dramatic slump in oil has made OPEC’s meeting its most closely watched in decades.
The bloc provides around a third of the world’s oil and the slump in prices continues to push down already worryingly low inflation in places like Europe and is hammering the economies and financial markets of many big producer countries.
Decisions from the meeting are due be detailed at a news conference at 1500 GMT.
MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3 percent. Shanghai shares hit a three-year high, extending their rally after a surprise interest rate cut last week. They are up 8.2 percent so far this month.
“The rate cut clearly showed the Chinese authorities are very much keen to support the economy. So even though Chinese economic data has been pretty weak, investors are convinced that there will be no hard landing,” said Naoki Tashiro, the president of TS China Research.
Japan’s Nikkei shed 0.8 percent as the yen rebounded mildly against the dollar. It has gained 5.1 percent so far this month to become the second best performing market in the region after China. The Bank of Japan also delivered a surprise easing of policy at the end of October.
The U.S. currency fetched 117.49 yen, off last week’s seven-year high of 118.98 yen while the euro traded at $1.2475, having made a recovery from a low of $1.23595 on Monday.
Many markets were seeing subdued trading as U.S. financial markets will be shut for the Thanksgiving holiday on Thursday.
Gold dipped for a second session, holding below $1,200 an ounce, as outflows resumed from the top bullion exchange-traded fund and traders remained cautious before an upcoming Swiss referendum on central bank bullion assets on Nov. 30.
(Addtional reporting by Hideyuki Sano in Tokyo; Editing by Gareth Jones)