Water, water, every where,
And all the boards did shrink
Water, water, every where
Nor any drop to drink
The world seems awash in oil. But unfortunately it's apparently awash in "Whatever!" when it comes to demand. Samuel Taylor Coleridge's line from his famous poem, Rhyme of the Ancient Mariner, pretty much applies to today's oil patch. There's plenty of it around but few takers. And the implications seemingly spread with each decline in prices as the WSJ reports about the Asian markets overnight.
HONG KONG—Asian markets tumbled Tuesday after global oil benchmarks hit the lowest levels in almost seven years in U.S. trading, sending energy stocks and raw materials producers sharply lower.
While oil prices stabilized somewhat during Asia market hours, both West Texas Intermediate and Brent crude had earlier hit their lowest levels since 2009 in the wake of the Organization of the Petroleum Exporting Countries’ failure at their meeting last week to take any steps to cut supply.
WTI futures edged up 0.4% to $37.79 a barrel on Tuesday, while Brent advanced 0.7% to $41.03 a barrel.
Oil isn’t the only commodity slumping. Spot iron ore fell for a seventh consecutive session on Monday, to a fresh decade low, amid further signs of weak demand from steelmakers.
Commodity producers and energy stocks tumbled, sending the Australian S&P/ASX 200 down 0.6% as mining giants BHP BillitonLtd fell 5.3% and Rio Tinto Ltd sank 4%. Both companies rely on iron—a key steelmaking ingredient—for a large portion of their earnings.
Investors are capitulating as the outlook for commodities prices dims further.
“It is quite spectacular, really,” said Tim Schroeders, a Melbourne, Australia-based resources fund manager at Pengana Capital. “We haven’t just seen low commodity prices, but continued falls in commodity prices,” he said. “Now, we are getting to a point where people have been so wrong for so long, they are having to address the situation and sell.”
While Tuesday’s slide follows another oil price collapse, it is also rooted in expectations that the U.S. Federal Reserve will soon raise rates, which could further weaken commodities demand, Mr. Schroeders said.
Chinese stocks fell, even as trade data for November pointed to a slower pace of decline compared with the previous month. Exports fell 3.7% year-over-year in yuan terms and imports fell 5.6%. Both declines were smaller than the drop expected by economists.
And Reuters noted the outlook for China remains nearly as mysterious to many as the Chinese language itself.
Underlining the cautious outlook for China, a Reuters poll of Japanese firms showed deep pessimism about near-term Chinese growth prospects, with 79 percent saying they do not expect to expand business there next year.
Tuesday's data showed China's imports fell for the 13th consecutive month with a 8.7 percent decline in November compared to a year earlier, indicating concerns about China's economic outlook will dog investors next year.
"Investors will remain quite sceptical about the true growth conditions of China which will mean that sentiment will remain quite fragile going into 2016," Kinger Lau, chief China strategist at Goldman Sachs, told a briefing in Hong Kong.
China is expected to eventually report growth of about 7 percent for this year, which would be the weakest pace in a quarter of a century. But according to an index used by Goldman Sachs, actual 2015 growth may be as much as 2 percentage points weaker.
Investors are capitulating as the outlook for commodities prices dims further.
“It is quite spectacular, really,” said Tim Schroeders, a Melbourne, Australia-based resources fund manager at Pengana Capital. “We haven’t just seen low commodity prices, but continued falls in commodity prices,” he said. “Now, we are getting to a point where people have been so wrong for so long, they are having to address the situation and sell.”
While Tuesday’s slide follows another oil price collapse, it is also rooted in expectations that the U.S. Federal Reserve will soon raise rates, which could further weaken commodities demand, Mr. Schroeders said.
Chinese stocks fell, even as trade data for November pointed to a slower pace of decline compared with the previous month. Exports fell 3.7% year-over-year in yuan terms and imports fell 5.6%. Both declines were smaller than the drop expected by economists.
And Reuters noted the outlook for China remains nearly as mysterious to many as the Chinese language itself.
Underlining the cautious outlook for China, a Reuters poll of Japanese firms showed deep pessimism about near-term Chinese growth prospects, with 79 percent saying they do not expect to expand business there next year.
Tuesday's data showed China's imports fell for the 13th consecutive month with a 8.7 percent decline in November compared to a year earlier, indicating concerns about China's economic outlook will dog investors next year.
"Investors will remain quite sceptical about the true growth conditions of China which will mean that sentiment will remain quite fragile going into 2016," Kinger Lau, chief China strategist at Goldman Sachs, told a briefing in Hong Kong.
China is expected to eventually report growth of about 7 percent for this year, which would be the weakest pace in a quarter of a century. But according to an index used by Goldman Sachs, actual 2015 growth may be as much as 2 percentage points weaker.
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