Oil hits 6-year low, dragging energy stocks down; dollar weakens

[HONG KONG] Oil touched its lowest level since 2009, dragging Asian energy shares down amid increased projections for US production. The dollar weakened from its strongest in more than a decade to major peers ahead of this week's Federal Reserve meeting.

West Texas Intermediate crude dropped 1 per cent to US$44.39 a barrel by 11:21 am in Tokyo, after earlier falling to as low as US$43.57. A gauge of energy producers dropped the most among the 10 industries on the MSCI Asia Pacific Index. Standard & Poor's 500 Index futures were little changed. The Bloomberg Dollar Spot Index fell 0.2 per cent as the greenback weakened 0.3 per cent to US$1.0525 per euro, after reaching its strongest level since January 2003.

US oil dropped 9.6 per cent last week and speculators cut bullish wagers to the lowest in more than two years as falling rig counts fail to cool a supply glut. The Fed may remove the word "patient" from its statement this week, giving it more flexibility on the timing of potential rate increases. The euro is heading for its biggest ever quarterly loss versus the dollar after the region's central bank took deposit rates below zero and began buying bonds as tries to stave off deflation.

"Crude has performed even worse with the strong dollar as it's been having its own demand and supply issues," said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul. "We are seeing diverging monetary policies between the Federal Reserve and other major central banks, especially the ECB. Investors are curious whether the Fed will raise rates in June." Brent Slide West Texas Intermediate crude lost 4.7 per cent on Friday, and capped a fourth straight a weekly retreat. Brent, the benchmark contract for more than half of global oil, fell 0.9 per cent to US$54.17 per barrel following Friday's 4.2 per cent retreat.

The US surplus may soon strain the country's storage capacity, renewing the slump in oil prices, the International Energy Agency said Friday. Hedge funds and other money managers reduced their net-long position in WTI by 2.5 per cent in the seven days ended March 10, US Commodity Futures Trading Commission data show.

South Korea's S-Oil Corp. tumbled 4.1 per cent and Japan's Inpex Corp. retreated 3.6 per cent. Santos, Australia's No 3 producer, fell 2.1 per cent while BHP Billiton, the world's biggest miner, decreased 0.9 per cent.

Anger over alleged bribes and kickbacks at Brazil's state- run oil producer Petroleo Brasileiro SA brought more than 1 million people to the streets Sunday demanding President Dilma Rousseff's impeachment. The Next Funds Ibovespa Linked Exchange Traded Fund, which tracks Brazilian shares, dropped 1.2 per cent in Tokyo.

Dollar, Won The Bloomberg dollar gauge, which tracks the greenback against 10 major peers, climbed 0.8 per cent on Friday to its highest level in data going back to the end of 2004.

The won slipped a sixth day, losing 0.5 per cent to 1,135.63 per dollar and touching its weakest level since July 2013. Korea's currency retreated 2.7 percent last week, the most since 2011, as the central bank unexpectedly cut interest rates. Malaysia's ringgit dropped 0.4 per cent to 3.6995 a dollar.

The Australian dollar added 0.1 per cent to 76.45 US cents, after sliding 0.9 per cent on Friday. Minutes of the Reserve Bank of Australia's March 3 meeting, when the key rate was held at 2.25 per cent after a cut in February, are due Tuesday.

Investors raised their bearish bets on the Australian dollar to a record as BlackRock, the world's largest money manager, expects the currency to plunge to levels well below what the RBA prefers. Traders wager there's a 50 per cent change the RBA will reduce borrowing costs again within six months, according to data compiled by Bloomberg from swap contracts.

BLOOMBERG