Asia: Stocks mostly lower as Goldman slashes oil price forecast
Asian stocks ended mostly lower on Friday, as energy companies slid after Goldman Sachs warned oil prices could hit as low as $20 per barrel.
Hong Kong’s Hang Seng index fell 0.27% and Japan’s Nikkei 225 dropped 0.19% while the Shanghai composite rose 0.07%.
Goldman on Friday said it expected West Texas Intermediate prices would average $48.10 per barrel this year from an earlier estimate of $52 per barrel. The broker lowered the 2016 WTI price forecast to $45 per barrel from $57 per barrel earlier.
Brent prices this year are expected to average $53.70 per barrel, compared to an earlier projection of $58.20 per barrel earlier, while 2016 Brent prices are seen at $49.50 per barrel following a prior prediction of $62 per barrel.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth, resilient non-OPEC supply and slowing demand growth, with risks skewed to even weaker demand given China’s slowdown and its negative EM feedback loop,” Goldman said.
“While not our base case, the potential for oil prices to fall to such levels, which we estimate near $20/bbl, is becoming greater as storage continues to fill.”
Goldman’s report sent Brent down 1.9% to $47.95 per barrel and WTI down 2.2% to $44.95 per barrel at 1027 BST.
Meanwhile, investors continued to assess Thursday’s Chinese inflation report which showed the consumer price index increased 2% in August from a year earlier following a 1.6% rise a month earlier, beating forecasts for a 1.8% gain.
The producer price index fell 5.9% in August more than the 5.6% decline expected and July’s 5.4% drop.
The market also mulled remarks from Chinese Premier Li Keqiang at the World Economic Forum in the northeast city of Dalian on Thursday. He tried to ease worries by saying the country’s economy won’t fall apart, the recent volatility won’t affect government targets and reforms are on track.
On Friday, credit data showed China’s banks extended a net 810bn yuan in renminbi loans last month, down from 1480bn yuan in July, broadly in line with expectations
Looking ahead, China will on Sunday see important data releases including retail sales and industrial production figures.
“So much of the recent market turmoil has come from China and this data could be the latest trigger,” said Craig Erlam, senior market analyst at Oanda.
“These are some key data releases and could dictate sentiment at the start of the week.”
Next week also sees the Federal Reserve’s decision on interest rates with many analysts expected no change amid the volatility sparked by China.
“Markets feel on edge at the moment with the looming Federal Open Market Committee meeting next week creating an air of unease and a lack of conviction, particularly in equities,” said Deutsche Bank analyst Jim Reid.
The Bank of Japan may also announce monetary easing at its meeting Monday and Tuesday as the country’s economy struggles to gain momentum after a contraction last quarter.