Asian Shares Gain After OPEC Deal

Asian share markets were up early Thursday, tracking gains in U.S. equities after major oil producers signaled they could agree to limit production in November.

Australia's S&P/ASX 200 rose 0.9%, with Japan's Nikkei Stock Average was higher by 1.5% and Korea's Kospi up 0.8%. Hong Kong's Hang Seng Index gained 0.6% and Shanghai Composite Index was up 0.3%.

Overnight in the U.S., oil prices surged 5.3%, their biggest gain in more than five months, pushing up the S&P 500's energy sector to its biggest gain since January.

"I think the trend (for oil prices) should be to go up," said Howard Wong, head of research for Kim Eng Securities in Hong Kong.

Members in the Organization of the Petroleum Exporting Countries were reaching their maximum production capacity and probably needed to agree to a cap, he said.

"Six months ago, they couldn't reach a deal because Iran knew they had extra barrels to sell," said Mr. Wong.

Among key energy-related stocks in Australia, Oil Search Ltd. was up 6.1%, and Woodside Petroleum Ltd. gained 5.7%. Commodity stocks also jumped, with BHP Billiton Ltd. gaining 3.6% and Rio Tinto Ltd. adding 2.3%.

In Japan, oil explorer Inpex Corp. surged 7.2%, while Japan Petroleum Exploration Co. Ltd. rose 9.2%.

The surprise deal reached by OPEC on Wednesday will provide short-term support for oil prices, analysts said, but uncertainty is set to remain high in the coming months until the deal is ratified. The proposal won't likely have any impact on current production given that it won't be ratified until late November.

In early Asian trade, the Nymex crude price was up 31 cents at $47.35 a barrel, while Brent crude, the international oil benchmark, added 34 cents at $49.03 per barrel.

Yet some analysts questioned whether the latest oil price rally could be sustained in the coming weeks.

"More cynical traders pointed out the complete lack of detail, including the potentially problematic question of which nations will curtail production," said Michael McCarthy, chief market strategist at CMC Markets, in a note.

Meanwhile, gains in Japanese stocks were supported by a weaker yen against the dollar, with the Japanese currency down 0.5%.

The WSJ Dollar Index, which tracks the greenback against 16 currencies, was relatively unchanged in early Asian trade after weakening against currencies of oil-producing nations in U.S. trade.

Among other Asian currencies, the Indonesian rupiah was up marginally, while the Malaysian ringgit gained 0.6%.

Analysts expect improved optimism in markets in the near term as economic conditions stabilize globally amid more steady oil prices and the widely held view that the U.S. will raise interest rates from December.

Jenny Hsu contributed to this article.

Write to Kenan Machado at [e-mail] and Willa Plank at [e-mail]

(END) Dow Jones Newswires

September 28, 2016 23:15 ET (03:15 GMT)

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