Seeing the bigger picture: oil price slump is part of broader Asian pullback

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By Henning Gloystein

SINGAPORE (Reuters) – The steep plunge in crude futures in the last few weeks was triggered by a nascent glut as supply-growth started to outpace demand, but it was also part of a broader pullback from risky emerging market assets such as Asian currencies and stocks.

Those assets had done well in recent years, boosted by economic growth in nations such as China, India and Indonesia.

But bulging debt across many Asian economies, tightening U.S. fiscal policy and the Sino-U.S. trade war have driven investors to vote with their feet, pulling their money out of assets such as oil or Asian stocks and instead turning to safe-havens like the U.S. dollar.

As part of that shift, oil markets have lost a third of their value since early October (LCoc1) (CLc1).

“Anything denominated against the USD is under pressure right now,” said Gregg McKenna, an independent cross-asset market analyst based in Australia.

(GRAPHIC: Oil vs Dollar – https://tmsnrt.rs/2R8L4ih)

Billions of dollars have been pulled out of crude futures.

“Traders reported capitulation and liquidation,” ANZ bank said in a note on Monday.

It added that net long positions for crude futures, which would profit from increasing oil prices, “were reported to be cut to their lowest level in three years”.

Read more at : https://www.investing.com/news/commodities-news/seeing-the-bigger-picture-oil-price-slump-is-part-of-broader-asian-pullback-1699616

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