Stocks rise on OPEC production agreement; oil rally fades

AP News
Posted: Sep 29, 2016 7:33 AM
Stocks rise on OPEC production agreement; oil rally fades

HONG KONG (AP) — Energy stocks led most markets higher on Thursday after OPEC nations reached a preliminary deal to cut oil production for the first time in eight years. The price of crude, which shot up about 5 percent on Wednesday's news, edged back slightly.

KEEPING SCORE: In stock markets, Germany's DAX advanced 0.7 percent to 10,512 and France's CAC rose 1.0 percent to 4,477. Britain's FTSE 100 climbed 1.1 percent to 6,921. U.S. stocks were poised for a more subdued open. Dow futures were flat and the broader S&P 500 futures were down almost 0.1 percent.

CRUDE CUT: Shares of energy companies surged after OPEC members struck an understanding to curb output at their next meeting, in November. The cartel, whose members have been hit by depressed oil prices because of excess global production, overcame long-running disagreements and agreed in principle to limit production to between 32.5 million and 33 million barrels per day. Japan Petroleum Exploration Co. surged 8.8 percent and Chinese oil producer CNOOC jumped 5 percent. In London, Royal Dutch Shell climbed 5.4 percent and BP gained 4.2 percent.

MARKET INSIGHT: Analysts were skeptical about whether the OPEC cut would provide a long-term boost because it did nothing to address weak demand. "For oil to see a sustainable rally from here, demand side indicators need to be represented better," said Nicholas Teo, trading strategist at KGI Fraser Securities in Singapore. "So far though, nothing of that sort has appeared in the horizon."

ENERGY: Benchmark U.S. crude oil futures leaped after the OPEC announcement, but momentum later reversed as traders grew skeptical of the deal's potential long-term impact. Crude oil lost 7 cents to $46.98 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $2.38 on Wednesday. Brent crude, the international standard, shed 20 cents to $48.49 a barrel in London.

ASIA'S DAY: Japan's benchmark Nikkei 225 index jumped 1.4 percent to close at 16,693.71 and South Korea's Kospi advanced 0.8 percent to 2,068.72. Hong Kong's Hang Seng rose 0.5 percent to 23,739.47 and the Shanghai Composite Index gained 0.4 percent to 2,998.48. Australia's S&P/ASX 200 climbed 1.1 percent to 5,471.30. Indexes in Taiwan, Singapore, Indonesia, Thailand, the Philippines and New Zealand also rose.

CURRENCIES: The dollar rose to 101.46 yen from 100.93 yen in late trading Wednesday. The euro was roughly flat at $1.1219.