HONG KONG—Energy firms led a rally in Asian stock markets Thursday, while high-yielding currencies advanced after Opec’s shock agreement to cut oil output sent crude prices soaring.
The gains come after Opec’s “historic” announcement late Wednesday of a deal”•the first of its kind in eight years”•lit a fire under petroleum-linked shares in New York.
At the end of six hours of negotiations and weeks of horse trading, the 14-member group unveiled the plan to cut production by 750,000 barrels.
The news came as a surprise to many market-watchers who had feared the fractious body would not be able to reach a consensus.
However, Iran”•whose refusal to limit output caused a similar meeting to break down in April”•will not join the reduction, a major concession from Opec kingpin and bitter rival Saudi Arabia.
Details of the cuts will be agreed at the group’s twice-yearly meeting on November 30.
“Today Opec has taken a historic decision,” said Algerian Energy Minister Noureddine Boutarfa, adding that the move had been agreed on unanimously.
The announcement was immediately cheered on oil markets, with West Texas Intermediate soaring more than five percent and Brent tacking on almost six percent.
Traders have been praying for a cut as a global supply glut and overproduction have hammered prices for the past two years, sending them to near 13-year lows to below $30 at one point in early 2016.
“Opec pulled the oil rabbit out of the hat last night, agreeing a modest production cut that blindsided the market,” Jeffrey Halley, senior market analyst at OANDA, said in a note.
“The nuts and bolts will be thrashed out at the November 30th Opec meeting and it is Saudi Arabia who has clearly blinked first, allowing Iran, its main rival, to ramp up production.”
While crude struggled in Asian trade”•WTI added two cents and Brent lost five cents –energy firms soared.
In Hong Kong CNOOC piled on more than five percent and PetroChina added more than three percent, while Sydney-listed Woodside Petroleum was up more than seven percent and BHP Billiton added 4.7 percent.
Inpex in Tokyo rocketed 5.7 percent and Japan Petroleum Exploration rocketed 8.8 percent.
The gains pulled regional stock markets higher, with Tokyo ending up 1.4 percent, while Shanghai closed up 0.4 percent and Hong Kong added 0.2 percent in the afternoon.
Sydney climbed 1.1 percent, and Seoul and Taipei put on 0.8 percent each. There were also strong gains in Singapore, Manila and Wellington.
Optimism spread to foreign exchange markets, where energy-linked currencies climbed. The oil-reliant Malaysian ringgit rose 0.5 percent against the dollar and the Australian dollar put on 0.1 percent while Canada’s dollar added one percent.
The greenback rose against the yen, which is considered a safe option in times of trouble, but it fell against the euro and pound.
However, analysts warned the euphoria over the Opec move could be short-lived as output is still high and the market is oversupplied.
“I cannot see a good reason for a major increase in the price of oil” since the market remains “way oversupplied”, Ian Taylor, the head of Vitol Group BV, the world’s largest oil-trading house, told a Bloomberg conference in London.