Battered oil fights back, sterling hit as May’s poll lead shrinks

LONDON: Battered oil prices recovered some ground on Friday as investors looked past disappointment that an Opec meeting did not produce bigger supply cuts, while sterling slid on a poll showing the ruling Conservatives’ lead shrinking, two weeks before an election.
European stock markets opened down as turbulence in oil markets following Thursday’s Opec meeting, at which oil producers extended existing output cuts but did not expand them, undermined sentiment towards risk assets in general. Asian shares also fell.
Some of the sharpest moves came in currencies, where Britain’s pound fell over 0.5 per cent to $1.2861 and looked set for its biggest one-day slide in over three weeks and steepest one-week decline since early April.
The first poll taken since a suicide bombing killed 22 people indicated that Britain’s opposition Labour Party had cut May’s Conservative Party lead to five points less than a fortnight before the parliamentary election.
“With this kind of momentum and almost two weeks to go until the vote, not only is this not going to be the breeze that May anticipated when she called the snap election last month, it could yet turn into a humiliating defeat for the Conservative leader and her party,” said Craig Erlam, Senior Market Analyst at OANDA.
“Coming on the back of losses yesterday, it’s turning into a rotten end to the week for the pound.”
Sterling’s weakness, good news for exporters, helped keep London’s blue-chip FTSE-100 stock index in positive territory just as other European bourses fell .
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan, which closed at a two-year high on Thursday, fell 0.2 per cent, shrinking its weekly gain to 1.45 per cent. Japan’s Nikkei closed 0.6 per cent lower.
Trade in US stock futures pointed to a muted start for Wall Street, where the S&P 500 and the Nasdaq closed at record highs on Thursday after strong earnings reports from retailers.
Oil edged higher but remained on the back foot after tumbling 5 per cent in the previous session.
On Thursday in Vienna, the Organization of the Petroleum Exporting Countries (Opec) and some non-Opec producers agreed to extend a pledge to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 — disappointing investors betting on longer or larger curbs.
Clawing back some of Thursday’s losses, Brent crude futures were at $51.80 per barrel at 0755 GMT, up 0.66 per cent, from their last close. They were still set to end on Friday with a weekly loss of more than 3 per cent, however.
US West Texas Intermediate (WTI) crude futures were below $50, at $49.15, though still up 16 cents from their last close.
Elsewhere, the dollar slipped 0.5 per cent to 111.25 yen , while the dollar index, which tracks the greenback against a basket of six major peers, was 0.14 per cent lower at 97.110. The euro was virtually flat on the day at $1.1212.
The weaker dollar and pullback in risk appetite were a boon for gold. Spot gold rose 0.5 per cent to $1,261 an ounce, poised for a 0.5 per cent gain for the week.
Energy firms also took a hit on Friday after crude prices plunged almost five per cent the previous day as traders were left disappointed by Opec’s latest output cuts. While oil prices edged up slightly in Asian trade, energy plays took a hit. CNOOC fell 1.4 per cent and PetroChina lost 1.5 per cent in Hong Kong while Sydney-listed Woodside Petroleum sank 2.7 per cent and Rio Tinto was off 1.8 per cent. Inpex dived two percent in Tokyo.
“It’s the old market axiom — buy the rumour and sell the fact — that worked again for oil,” said Greg McKenna, Chief Market Strategist at AxiTrader, said in a note. — Reuters/AFP