Crude surges after Trump tears up Iran deal
AP file photo
HONG KONG, China — Oil prices surged more than two percent in Asia on Wednesday after Donald Trump pulled the United States out of the Iran nuclear deal, fueling fresh geopolitical uncertainty.
Both main crude contracts have been rising in recent weeks to reach three-and-half-year highs on expectations the president would withdraw from the 2015 pact, which opened up Tehran’s atomic program in return for an easing of sanctions.
In an address Tuesday he said he would pull out of the accord — which was agreed by Britain, China, Germany, Russia and the Obama administration — calling it “defective at its core”.
Iran’s President Hassan Rouhani said the country could now resume uranium enrichment “without limit” but would discuss its response with the other signatories before making a decision.
With the move already priced into markets, WTI and Brent sank soon after the announcement with some commentators suggesting Trump could still pedal back on some of his rhetoric and shift to a more diplomatic tone.
However, they bounced back strongly in Asia and there is talk it could continue rising to $80 a barrel, with gains helped by uncertainty in oil-rich Venezuela, the OPEC-Russia output cap, improving global demand and data pointing to a drop in US stockpiles.
“Given the unilateral move by the US, much of the movement on oil prices had been factored in,” said Stephen Innes, head of Asia-Pacific trade at OANDA.
Dollar up on Fed talk
He said that the market would continue to be supported by other factors, adding that “even without Iran sanctions oil prices will remain firm”.
The hike in oil prices boosted regional energy firms, with CNOOC, PetroChina and Sinopec all up almost two percent in Hong Kong, while Inpex added a similar amount in Tokyo. Sydney-listed Woodside Petroleum and Rio Tinto were also well up.
Despite the energy sector’s gains, Asian equity markets were in the red, with Tokyo ending the morning session 0.4 percent lower, Hong Kong shedding 0.1 percent and Shanghai 0.2 percent off.
Singapore fell 0.3 percent and Seoul was off 0.6 percent while Sydney was barely moved. Manila and Jakarta fell but Wellington and Taipei were positive territory.
National Australia Bank’s strategist Ray Attrill said in a commentary: “It’s early days in terms of how the decision will play out in terms of heightened geopolitical stress in the Middle East.”
On currency markets, the dollar held gains after Federal Reserve boss Jerome Powell indicated the central bank would press on with raising interest rates, and that the risks to emerging markets were limited.
“There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for (emerging market economies), he told a conference in Zurich on Tuesday.
The greenback was well up against most other high-yielding currencies with the South Korean won off 0.5 percent, Malaysian ringgit down 0.1 percent and Indonesian rupiah 0.2 percent lower. /cbb
