Oil nears three-year high after OPEC fireworks

LONDON, July 6 (Reuters) – Oil prices plunged to a three-year high on Tuesday, dragging petrocurrencies and bond yields after the world’s major oil producers disagreed on production plans.

European equities sputtered at the prospect of faster inflation. China had also terrified its tech sector with another high-profile clamp, but the main move was around the black stuff.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, were forced to suspend talks on Monday after the United Arab Emirates rejected a proposed eight-month extension of production restrictions. read more

Some OPEC+ sources said there would be no increase in oil production in August, while others said another meeting would be held in the coming days and believed there will be a boost in August. read more

Rough traders didn’t stick around to find out. They propelled Brent to $77.66 — its highest level since October 2018 — and U.S. crude to its highest level since late 2014 at $76.90 a barrel. Oil is up about 50% this year and more than 385% since last year’s COVID-induced slump.

“Without an injection of some additional barrels of oil in the coming weeks, given the tightness in the market, Brent could cross the $80/barrel threshold,” analysts UniCredit said.

Major petrocurrencies loved it. The Norwegian krone, Canadian dollar and Russian ruble all rose. The Australian and New Zealand dollars also rose as the Australian central bank weakened stimulus measures, although like many of its counterparts, it did its best to dampen rumors of interest rate hikes. read more

Back in European equity markets, the oil sector was one of the only ones to gain ground. It rose 0.5%, while the STOXX 600 in the region fell 0.2%.

“Slowing growth, rising inflation and less expansionary monetary policy could put a damper on equity markets and riskier corporate bonds,” said Pictet Asset Management’s chief strategist Luca Paolini.

TECHNICAL PROBLEMS

Overnight in Asia, MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) was up 0.1% after spending the session in and out of the red.

Japan’s Nikkei (.N225) finished 0.2%, but Australia’s S&P ASX200 (.AXJO) bounced back after the RBA’s decision to hold rates and Hong Kong (.HSI) marked its sixth day of losses and China’s CSI300 (.CSI300) at a nearly two-month low.

It came after China’s Cyberspace Administration ordered an investigation into ride-hailing giant Didi (DIDI.N) just days after it was listed on the New York Stock Exchange. read more

In pre-U.S. market trading, the company’s shares, which were valued to $75 billion on Friday, fell 25%. read more

“There is still uncertainty from the Chinese tech companies and they are prominent in the Asian market, so that could cloud the market sentiment,” said Tai Hui, chief Asian market strategist at JPMorgan Asset Management.

“The technology sector is very important in Asia and we won’t have much clarity in the coming weeks or even months about the regulatory adjustments in China and that will be a major driver for the market.”

Investors’ appetites for Chinese tech companies could be tested by Xiaomi Corp (1810.HK) on Tuesday ordering 12 banks to lead a potential issuance of US dollar-denominated debt.

Investors worldwide are eagerly awaiting the release of the minutes of the US Federal Reserve’s Federal Open Markets Committee for June on Wednesday, as a guide to whether the pending emergency stimulus can be phased out.

Additional reporting by Scott Murdoch in Singapore; Editing by Alison Williams

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