BLBG: Oil Rises for Sixth Day, Yen Strengthens on Libya as Asia Stocks Decline
Oil advanced for a sixth day in New York after reaching $100 a barrel as Libya’s uprising reduced shipments from Africa’s third-biggest producer. The yen and Swiss franc climbed, while Asian stocks declined, sending the regional benchmark index to a two-month low.
Crude for April delivery rallied 0.9 percent in New York to $98.97 a barrel at 3 p.m. in Tokyo. Brent reached a 30-month high in London. The yen and franc strengthened against all their major peers and the euro rose toward a three-week high against the dollar. Japan’s bonds gained, driving 10-year yields down to a three-week low. The MSCI Asia Pacific Index sank 0.5 percent, adding to a three-day loss. Standard & Poor’s 500 Index futures added 0.2 percent after a two-day drop.
Loyalists of Libyan leader Muammar Qaddafi sought to crush dissent in the capital, Tripoli, as his opponents tightened control of eastern cities, with Barclays Capital estimating that about 1 million barrels of daily production may have been shut. A $20 increase in oil prices may cut global gross domestic product growth estimates by 1 percent, Societe Generale said.
“We’re having a natural reaction to the unrests with oil going above $100,” Todd Martin, Societe Generale’s Asia equity strategist, said in a Bloomberg Television interview in Hong Kong. “We could see GDP growth forecasts downgraded slightly.”
Brent crude jumped as much as 1.6 percent to $113 a barrel on the London-based ICE Futures Europe exchange, taking its four-day rally to 10 percent amid estimates the revolt has led to the loss of as much as two-third of Libya’s oil output. The April contract for West Texas Intermediate oil surged as much as $4.58 yesterday to touch $100, before settling at $98.10.
‘Upside Risk’
Total SA and OMV AG became the latest energy producers to scale back Libyan operations, following in the footsteps of Eni SpA, RWE AG and BASF SE’s Wintershall unit. The cuts create “significant upside risk” to oil prices by reducing OPEC’s ability to absorb any further supply disruptions in the Middle East, according to Goldman Sachs Group Inc. Libya pumped 1.6 million barrels of oil a day in January, enough to meet 8 percent of U.S. demand, according to data compiled by Bloomberg.
The fighting in Libya, which holds Africa’s largest oil reserves, is the most violent yet seen in six weeks of popular uprisings across the Middle East and North Africa, which have already unseated longtime rulers in Tunisia and Egypt. U.S. President Barack Obama called for international pressure on Qaddafi’s regime to end its attacks.
Japan’s 10-year bond yield fell two basis points to 1.225 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Treasuries snapped a decline from yesterday, with 10-year notes yielding 3.48 percent.
‘Reducing Risk’
The yen climbed to 82.02 per dollar from 82.51 in New York, as violence in Libya spurred demand for safe-haven currencies. The Swiss franc appreciated to a record high of 0.9276 per dollar before trading at 0.9287 from 0.9330 yesterday.
“The situation in the Mideast and Libya appears to be deteriorating,” said Tsunemasa Tsukada, chief manager for currencies and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest financial group by market value. “Investors are probably reducing risk right now, with money likely to go into the yen and the Swiss franc.”
The euro rose to $1.3769 from $1.3749 in New York, when it reached $1.3787, the highest since Feb. 3, on speculation the European Central Bank will increase interest rates before the Federal Reserve to curb oil-driven inflation.
German EU-harmonized consumer prices gained 0.5 percent after falling 0.5 percent in January, according to the median estimate of economists in a Bloomberg News survey before tomorrow’s data. ECB policy makers will make the decisions necessary to maintain price stability, President Jean-Claude Trichet told reporters yesterday in Frankfurt.
Quicker Inflation
Malaysia’s ringgit weakened 0.4 percent to 3.0595 against the dollar and the South Korean won slid 0.6 percent to 1,131.05. Prices in Malaysia climbed at the fastest pace since mid-2009, while Singapore’s inflation rate rose to a two-year high of 5.5 percent in January, reports yesterday showed. Vietnam’s consumer prices gained the most in 24 months in February.
Gains in oil prices must be carefully monitored amid the unrest in the Middle East, Asian Development Bank President Haruhiko Kuroda said today in Seoul. The Bank of Korea said today consumer confidence slid for a third month in February as people became more concerned about the economy and job prospects.
New Zealand’s dollar slid toward the weakest level in a decade versus Australia’s on prospects the smaller nation’s central bank will cut interest rates next month after an earthquake likely dented growth. The so-called kiwi fell to NZ$1.3462 per Aussie from NZ$1.3437 yesterday, when it dropped to NZ$1.3476, the weakest since Dec. 23.
Stocks Drop
About three stocks declined for every three each that advanced on MSCI’s Asian index, which was on course for its first four-day drop since Nov. 17. dropped 2.5 percent in the previous three sessions. Qantas Airways Ltd. and China Southern Airlines Co. lost at least 2.5 percent, leading airlines lower. Among energy producers, Cnooc Ltd. gained 0.9 percent and Japan’s Index Corp. rallied 1.8 percent.
India’s benchmark Bombay Stock Exchange Sensitive Index decreased 1.4 percent before a weekly report on food prices that may show rising costs for consumers. Vietnam’s VN Index dropped 2 percent after Prime Minister Nguyen Tan Dung cut the credit- growth target to below 20 percent from 23 percent for 2011 and told ministries to narrow the budget deficit.
The S&P 500 posted yesterday its biggest two-day slump in six months following the surge in oil prices. The decline in stocks worldwide has wiped out more than $1.2 trillion since Feb. 18, when global market values reached the highest level since June 2008, according to data compiled by Bloomberg.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net.
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
