Brent oil tops $113 per barrel on Libya crisis
Unrest in Libya and the threat of contagion to other oil producing countries in the region drove Brent crude to a 29-month high above $113 on Thursday, fuelling worries about slower global growth and knocking Asian shares lower.
Copper hovered near a one-month low and the dollar stayed on the back foot amid worries that the U.S. economy would be especially vulnerable to high oil prices, given its reliance on consumer spending to drive growth.
World leaders condemned Muammar Gaddafi’s bloody crackdown on a revolt that has split Libya, but took little action to halt the bloodshed from the latest upheaval reshaping the Arab world.
Japan’s Nikkei 225 index .N225 fell 1.2 percent, while stocks elsewhere in Asia .MIAPJ0000PUS shed 0.6 percent, having earlier risen as much as 0.4 percent.
“Investors knew all along that a correction was on its way after the rally, and the turmoil in Libya gave the market a good opportunity to enter one,” Makoto Kikuchi, CEO at Myojo Asset Management Japan, said about Tokyo stocks.
London Brent crude jumped $2.55 to as high as $113.80 a barrel, for the first time since September 2008, having gained nearly 10 percent in the past four sessions. U.S. crude last traded at around $99 a barrel, a whisker away from Wednesday’s high of $100.
“I see more upside on Brent for the moment with prices likely to hit $120 by the end of March,” said Ken Hasegawa, a commodity derivatives manager at Newedge brokerage in Tokyo.
Other Asian stock markets showed signs of stabilizing after two straight sessions of losses, but the general mood remained one of caution as investors worry that higher energy prices will hurt corporate profits and add to global inflationary pressures.
Australia’s S&P/ASX 200 index .AXJO fell 0.8 percent, South Korea’s KOSPI .KS11 slipped 0.6 percent. Hong Kong’s Hang Seng .HSI was little changed and China’s Shanghai Composite Index .SSEC edged up 0.2 percent.
Modest gains in U.S. stock index futures suggested a steadier start on Wall Street after two sessions of falls.
Gold, a traditional safe haven in times of trouble, traded at around $1,410 an ounce, not far from a record high around $1,430 set in December.
Copper erased early gains to be down 0.2 percent at $9,407 a ton, near a one-month low of $9,365 plumbed on Wednesday.
DOLLAR STRUGGLES
The dollar index .DXY, which tracks its performance against a basket of major currencies, shed 0.2 percent to 77.271.
Against the Swiss franc, the dollar fell to a record low at around 0.9275 franc, surpassing the previous trough of 0.9301 set at the end of the year.
Investors will also be eyeing a slew of U.S. data due later in the day, including retail sales and home sales, for clues on the pace of growth in the economy.
The euro held firm at $1.3762, coming within easy reach of its February 2 peak of $1.3862, helped also by recent hawkish comments on inflation by European Central Bank officials.
This has raised expectations the ECB will hike interest rates before the U.S. Federal Reserve.
Meanwhile, the New Zealand dollar stayed near two-month lows below $0.7500, with markets now pricing in an 88 percent chance that the next rate move will be a 25 basis point cut.
The move followed the deadly earthquake that hit the country’s second biggest city of Christchurch on Tuesday.
Source: Reuters