It was another bad day for global markets as oil gave no indication that it is ready to end its incessant plunge, with the Merval benchmark stock index dropping 8.3 percent yesterday, pushed down by energy companies that continue to be hit the hardest by the current global downturn.
Shares of Argentine companies that trade on Wall Street also plunged as oil prices plumbed 5-1/2-year lows, reacting to a statement by the Organization of Petroleum Exporting Countries (OPEC), declaring it would not cut oil output despite fears of a glut.
US crude tumbled almost five percent, extending losses after the close to come within two cents of US$55 a barrel. Benchmark North Sea Brent fell more than two percent, nearing US$60 in a rout that also deepened after closing. The losses extended last week’s selloff that erased 12 percent from US crude and 11 percent from Brent.
The Merval closed at 7,581 points with 189 million pesos traded, ending the day at a similar value to last June. Shares of almost all energy companies dropped, with Petrobras Brasil leading the way with a decline of 14.9 percent. YPF fell 11.1 percent, along with Transener (9.9 percent), Pampa Energía (9.8 percent) and Petrobras Argentina (9.6 percent).
With this new drop, the index accumulates a 22.7 percent drop so far this month.
Argentine companies trading in Wall Street also experienced a day filled with red ink as Petrobras plunged 8.3 percent, followed by Edenor that dropped 7.4 percent, Pampa Energía (5.7 percent), Banco Macro (five percent) and YPF (4.3 percent).
In yesterday’s early trading, Brent was supported by news of loading delays for January cargoes of North Sea Forties crude due to lower-than-expected output.
A production glitch at the Buzzard oilfield in the UK North Sea also helped Brent, as did news that Libya’s two biggest oil ports were shut due to fighting between armed factions.
Selling pressure emerged by midmorning after UAE’s Oil Minister Suhail Bin Mohammed al-Mazroui added to bearish comments by OPEC Secretary-General Abdullah al-Badri. Al-Mazroui said there was no need for an emergency OPEC meeting to help support prices. Venezuela and Algeria, which need higher oil prices for their economies, were among OPEC members that had proposed an emergency meeting after OPEC’s summit in Vienna last month did not agree on output cuts. OPEC’s next meeting is in June.
OPEC’s Al-Badri, meanwhile, said the 12-member OPEC could ride out the near 50 percent oil price slump since June without amending production.
US crude settled down US$1.90, or 3.3 percent, at US$55.91 a barrel. It fell thereafter to a new May 2009 low of US$55.02. Brent finished down 79 cents, or 1.3 percent, at US$61.06. It fell post-settlement to US$60.20, a bottom since July, 2009.
The disparity in their drop extended Brent’s premium versus US crude to a one-month high above US$5.
US crude sold off more sharply on fears of another sharp inventory build in the United States last week, traders said.
Extended effect
The drop in oil prices pulled down emerging market assets and boosted demand for the safe-haven yen, while global equity markets fell further after last week’s rout amid nagging worries about worldwide growth.
MSCI’s emerging markets index fell 1.7 percent, with Brazil’s Bovespa index off 2.1 percent and Mexico’s Bolsa index down 3.3 percent.
Major European stock indexes fell more than two percent, while the Nasdaq fell one percent, with the Dow and S&P 500 also losing ground after earlier falling about one percent each.
Russia continued to be hard-hit with the rouble plunging around 10 percent against the dollar, its sharpest fall since 1998, and Russian assets plunged on concern about possible new US sanctions over Ukraine, weak oil prices and one-sided bets that the currency would extend its slide. The Russian Central Bank decided yesterday to hike its key interest rate to 17 percent from 10.5 percent, effective from today.
A rise in yields on US Treasuries was limited by persistent concerns about weakening growth and inflation globally. US stocks dipped even as US manufacturing output posted its biggest gain in nine months in November as production expanded across the board, pointing to underlying US economic strength.
“The continued free-fall in crude is the main thing here,” said Uri Landesman, president at Platinum Partners in New York.
The benchmark S&P 500 has declined 4.3 percent since peaking at an all-time high on December 5.
In Europe, the FTSEurofirst 300 index of top regional shares fell 2.35 percent to close at 1,290.65 while MSCI’s all-country world index, which measures stock performance in 45 countries, fell 1.22 percent to 403.74.
“The drop in oil would normally be good news for the European economy, but in this case it’s actually bad news because it seriously raises the risk of deflation,” said Christian Jiménez, fund manager and president of Diamant Bleu Gestion in Paris.
Source: Buenos Aires Herald
Felipe 
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