By Josie Cox
The tumbling price of oil hammered commodity-dependent
currencies as well as shares in oil and gas companies Friday, a day
after the Organization of the Petroleum Exporting Countries left
its output target unchanged, diminishing hope of any imminent
respite for the ailing commodity.
In early trade, Brent crude was an additional 1% lower at $71.86
a barrel, its weakest level in four years, having already plummeted
nearly 7% on Thursday. It later picked up slightly.
Analysts had estimated OPEC would need to take 1 million to 1.5
million barrels a day off the market to support oil prices, which
have fallen by more than 30% since the summer, but its members
didn't bow to the market pressure.
Russia's ruble, which this year has also been pummeled by
geopolitical tensions and resulting sanctions, hit yet another
all-time low against the dollar, while fellow oil-linked currencies
such as the Canadian dollar, Norway's krone and Nigeria's naira
slipped too.
One dollar now buys more than 49 rubles. It started the year
close to 32.
"OPEC yesterday delivered just about the most unfriendly
possible response to ruble and oil prices," Tom Levinson, a
strategist at Sberbank said.
He added that it was unclear whether Russia's central bank would
intervene to curb the currency's slide.
"[That will] be dictated by the bank's judgment of whether
"financial stability" is at risk. It is hard to argue that it is
not, but the hurdle to ad hoc intervention has proven high to
date," Mr. Levinson said.
Barclays economists said they now expect Brent crude to sink
below $70 per barrel and the West Texas Intermediate benchmark to
fall even further.
"Over the course of the coming months, oil markets will have to
find a new equilibrium--a world where demand elasticities are
tested, and non-OPEC supply sensitivities, and particularly the
pain threshold for U.S. producers becomes better understood," they
wrote in a note.
Turkey, a major oil importer, is a bright spot. Aberdeen Asset
Management said it is now taking a more favorable view of the
country by buying the Turkish lira.
"There can be a shift from oil-exporter countries, we are
already witnessing it in Latin America's weaker growth performance.
But on a macro scale, lower energy prices should help global
growth, and this should have an overall positive impact on emerging
markets," said Viktor Szabo, a portfolio manager at the firm, which
manages around 322.5 billion pounds ($402 billion) in assets.
Istanbul's main stock exchange rose 1% on Friday.
"Given that Turkey imports more than 90% of its energy needs,
low oil prices will have positive implications," said emerging
market strategist Piotr Matys at Rabobank.
Shares in major airlines, including easyJet PLC, International
Consolidated Airlines--owner of British Airways--and TUI Travel PLC
climbed as much as 2.5%, buoyed by the prospect of cheaper fuel.
The Stoxx Europe 600 index of travel and leisure stocks rose
1.3%.
"A fall in oil prices means a fall in petrol prices, a fall in
transport costs, and should be treated as a tax cut for consumers,"
Peter Dragicevich, a strategist at Commonwealth Bank of Australia
wrote in a note.
Retail stocks and chemical companies are also widely seen as
potential beneficiaries.
But more broadly, the Stoxx Europe 600 index of the region's
largest oil and gas companies declined by almost 4% in early trade
to a more than one-month low, fiercely underperforming all other
sector indexes.
Biggest losers on the pan-European all-share index included BG
Group PLC, Petrofac Ltd., Royal Dutch Shell PLC and BP PLC.
London's FTSE 100 index, which has a high exposure to the energy
sector, fell 0.3% while Germany's DAX was down 0.1% and France's
CAC declined 0.2%. In thin trade following the Thanksgiving holiday
on Thursday, the S&P 500 was indicated opening 0.3% lower.
Futures, however, don't necessarily reflect moves after the opening
bell.
Russia's Micex was down around 0.1% according to Tradeweb, with
major oil companies Gazprom OAO and Lukoil OAO two of the biggest
fallers. Gazprom bonds were trading lower too.
Write to Josie Cox at josie.cox@wsj.com
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