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Oil prices fall as market awaits Trump decision on Iran

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Oil prices eased slightly on Tuesday, a day after hitting three-year highs, as investors braced for President Donald Trump’s decision on whether to withdraw the United States from the Iran nuclear deal.

Asian shares picked up, helped by technology stocks as generally upbeat earnings overcame weakness in the global smartphone market and concerns about more regulation.

US West Texas Intermediate (WTI) crude futures on Monday rose above $70 for the first time since November 2014, putting it more than 18 per cent above this year’s low touched in February.

On Tuesday, some of those oil-price gains were pared as traders took profit after Mr Trump said in a tweet he would announce his decision on the nuclear deal at 1800 GMT Tuesday.

“The oil market has priced in the high likelihood of Trump withdrawing from the nuclear deal with Iran. If he is going to impose sanctions similar to those the US had in 2012, that would likely cause a shortage in oil,” said Tatsufumi Okoshi, senior commodity economist at Nomura Securities.

Adding to market pressures, falls in Venezuelan oil production due to problems at the country’s oil company PDVSA also added to the rally.

US crude futures last traded at $69.97 per barrel, down 1.1 per cent from Monday’s settlement price.

Global benchmark Brent crude futures stood at $75.54 per barrel, down 0.8 per cent, having risen as high as $76.34 on Monday.

While caution on Mr Trump’s statement kept investors edgy in early trade, technology firms helped to generate gains for Asian equities.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6 per cent, with information technology shares rising 1.2 per cent. Japan’s Nikkei was 0.3 per cent higher.

Tech shares also lifted South Korea’s Kospi index, which rose 0.4 per cent.

Soaring valuations
Some analysts cautioned that the rally in technology shares could face a short-term correction as valuations soar.

Yoshinori Shigemi, global market strategist at JPMorgan Asset Management in Tokyo, noted that technology shares have been moving higher, taking up a larger share of indices as more money flows into the exchange trade funds (ETF) market.

There is currently a “positive feedback loop”, but if some sort of unforeseen negative event takes place, it “may turn into a negative feedback loop,” he said.

China’s blue-chip CSI300 index rose 1.3 per cent after the White House said on Monday that US-China trade talks would resume next week.

On Tuesday, China reported exports and imports jumped in April, beating forecasts, but the news did not impact markets.

On Wall Street on Monday, the S&P 500 gained 0.35 per cent, boosted by Apple’s sixth straight day of gains. – Reuters

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