Asian energy firms extended a global sell-off Wednesday, dragging regional equity markets, as oil prices continued to tumble on the back of warnings of slowing demand and rising stockpiles.
Both main contracts were down more than one percent as investors were spooked after the International Energy Agency (IEA) cut its forecast for crude consumption, saying recovering prices and a mild early winter were weighing on purchases.
The Paris-based group said the sector would likely be oversupplied in the last three months of the year and 2018, while the US industry body announced a huge jump in stockpiles last week.
The news comes after recent gains in crude fuelled by a production cut by the OPEC cartel and a brewing crisis in the Middle East between Saudi Arabia and Iran.
"The long-awaited short-term correction in oil prices finally occurred overnight," said OANDA senior market analyst Jeffrey Halley.
"Given the bullish run and extended long positioning across commodities in general in recent times, it was only going to (take) one straw to break the camel's back."
The losses in oil prices — which follow Tuesday's 1.9 percent fall in WTI and 1.5 percent drop in Brent — battered Asian energy firms.
Among the biggest losers Tokyo-listed Inpex dived 3.7 percent and Japan Petroleum Exploration tumbled 4.2 percent, while PetroChina and CNOOC in Hong Kong each plunged around three percent. Woodside Petroleum sank 1.4 percent in Sydney, while Rio Tinto was 2.7 percent lower.
Don't buy the tight-market hype, IEA says
Unless OPEC agrees to cut more production, output from non-member states will leave the market in surplus and limit the rally in oil prices, the IEA said.
Some ministers for the Organization of Petroleum Exporting Countries said an extension of an agreement that sidelines about 2 percent of the total global demand for oil in an effort to balance the market was necessary next year.
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