Oil balances high US production with Red Sea tensions

Amid a record high of 13.3 million barrels per day in US output, oil prices remain steady due to escalating tensions in the Red Sea

By Ahmed Azzam | @3zzamous | 21 December 2023

Market open
  • Equity benchmarks edge lower across Asia, following US losses

  • Japanese stocks hit hard, with Toyota Motor Corp leading losses

  • Crude pared gains Wednesday after data showed record US output

Asian markets react to global cues

Asian stock markets experienced a downturn, mirroring the losses seen on Wall Street, as traders tempered their expectations over potential interest rate cuts by the Federal Reserve. This adjustment in sentiment led to a decline in the MSCI All Country World Index, breaking its nine-session winning streak. The S&P 500 and Nasdaq 100 in the US both saw significant drops of 1.5% on Wednesday. As the year-end holiday season nears, trading in Treasuries and most currencies remained within a narrow range, with volatility diminishing.

Japanese and Korean markets bear the brunt

In Asia, Japanese stocks faced the brunt of the sell-off, particularly impacted by a steep decline in shares of Toyota Motor Corp following a safety scandal. Technology-heavy markets in South Korea and Taiwan also witnessed downturns, reflecting broader regional market sentiment.

Chinese shares outperform amid property market signs

Contrasting with the general trend, mainland China's shares were on the rise, heading for their best day since early November. This uptick came after data indicated a recovery in China's struggling property market. Interestingly, Chinese equities seemed to largely overlook a Wall Street Journal report about potential tariff hikes on some Chinese goods by the Biden administration.

Dollar weakens; focus on US yields and fed rates

The dollar weakened against its Group-of-10 peers as US 10-year yields fell to a five-month low, fueling speculation about lower Federal Reserve interest rates in the future.

Toyota's troubles impact Japanese market

Toyota Motor's shares slumped following a raid on Daihatsu Motor Co.’s offices over a safety scandal, leading to a recall of 1 million cars in the US. The raid was prompted by findings that the carmaker and its supplier had manipulated collision safety test results since as far back as 1989.

Oil prices stabilize amid mixed signals

Oil prices remained stable after three consecutive days of gains, balancing the surge in US production against ongoing tensions in critical global waterways. Brent futures briefly dipped but hovered around $80 a barrel, while West Texas Intermediate stayed close to $74. Recent US government data revealed a record high crude output of 13.3 million barrels a day, adding to the complex dynamics of the global oil market.