The 10-year US Treasuries yield rose as high as 2.5% in Asian trade, matching its 2015 peak. OPEC output rose last month to 33.787 million barrels a day on increases from Libya, Nigeria and Angola, according to independent estimates known as secondary sources, said a person familiar with the data.
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They are also taking heart from news on the weekend that 11 producers from outside OPEC, including Russian Federation, have agreed to reduce output. There is some concern among analysts that the big move in crude is not sustainable, and that the market may have overshot given the expectation that various producers would not comply with the cuts they agreed upon.
“The latest development is buoying optimism in the market”.
OPEC members had said they would only cut production if the non-OPEC producers agreed to cut as well. When OPEC announces these deals, oil prices typically rise. Even Malaysia has said it will cut production by 20,000 bpd, while Brunei has committed to 4,000bpd. The ideal price for oil is about $60 a barrel, because any higher would unleash a surfeit of shale production, Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg TV interview.
“Investors who have been overweight cash and fixed interest are continuing to push stocks higher as confidence builds”, Ric Spooner, chief market analyst at CMC Markets in Sydney, said in a note.
Another concern is how fast the US shale producers will ramp up their production in a bid to capture the higher prices.
About 80 more stocks fell as rose on the USA dollar-denominated MSCI Asia Pacific Index as of 9:26am Tokyo time, with Japan’s Topix index declining 0.2 per cent with the Nikkei 225 Stock Average.
“But at the back of our minds, we are confident that this was not (the) real production level, however, we hope this would be compensated with the improvement of the prices”, he said. If tightening in supplies continues into the second half of 2017, the deficit could amount to over 1.5Mbpd.
ADNOC’s supply cuts will mostly hit Asia, although refiners there said that the cuts fell within contractual allowances under which ADNOC can alter agreed monthly supply volumes. But in that almost two decade period, OPEC has always produced more oil than the quota in all but a handful of months.
Japanese indexes fell from their highest levels this year, and equity futures in Hong Kong and China tipped further losses after the worst day for mainland stocks since June distracted from Monday’s global rally. Euro zone government bond yields were sharply higher with German Bunds up 5 basis points at 0.40 percent as US yields topped 2.5 percent for the first time since October 2014. The higher prices go, the more producers around the world are eager to get pumping again.
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Alison Sider, Benoit Faucon, Nathan Hodge, Summer Said, Willa Plank and Rachel Rosenthal contributed to this article.
