Bulls And Bears

Local shares dip amid global oil supply fears

Sentiment in equities market here also hit by weak industrial, retail data from China

With receding trade tensions between the United States and China, investors had been gearing up for the slew of central bank meetings, led by the US Federal Reserve's likely rate cut decision.

But they were thrown a curve ball yesterday following drone attacks on two Saudi Aramco facilities last Saturday. Oil prices jumped by as much as 20 per cent.

Investors headed for safe havens such as gold - spot prices were above US$1,500 per ounce - as well as the yen and greenback. But black gold prices dipped after US President Donald Trump authorised the release of oil from US reserves.

Sentiment in the local equities market was also affected by weak industrial and retail data from China. The Straits Times Index (STI) closed 7.56 points, or 0.2 per cent, lower at 3,203.93.

Australia and South Korea locked in gains, but China and Hong Kong posted losses. Markets in Malaysia and Japan were closed.

The drone attacks are bound to increase tensions in the Middle East. US officials believe Iran was behind the attacks.

Saudi Arabia contributes 10 per cent of global oil supply. With the facilities accounting for half of its production, the disruption is a major supply shortage shock.

FXTM chief market strategist Hussein Sayed said the oil price surge "is the largest in almost three decades since Saddam Hussein invaded Kuwait".

"Such a reaction in price suggests we are currently facing an unprecedented threat to oil supplies that could reverberate throughout the global economy," he added.

DBS Group Research analysts say counters with exposure to the oil and gas sector could see rebounds.

Upstream firms - which mainly explore and produce crude oil and natural gas - serve as proxies to trade on the oil price rebound, they said.

Such firms saw heavy trading here. Rex International, which conducts oil exploration in markets such as Oman and the United Arab Emirates, jumped 0.6 cent, or 7.4 per cent, to 8.7 cents, with 114.8 million shares traded, the most in the Singapore market.

GSS Energy advanced 0.5 cent, or 7.5 per cent, to close at 7.2 cents.

Singapore shipyards could also get a boost from positive sentiment around oil prices, the analysts noted.

Sembcorp Marine added three cents, or 2.4 per cent, to $1.30, while Keppel Corp rose three cents, or 0.5 per cent, to $6.25.

Trading volume clocked in at 989.26 million shares, with total turnover at $752.49 million.

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A version of this article appeared in the print edition of The Straits Times on September 17, 2019, with the headline Local shares dip amid global oil supply fears. Subscribe