Asian stocks gain, oil prices decline after UAE says it will exit OPEC

Asian stocks mostly rose on Wednesday despite Wall Street losses, while oil slipped after UAE announced exit from OPEC. Investors tracked US-Iran tensions, Fed decision, and earnings. Regional indexes were mixed, with Hong Kong leading gains and Australia, Taiwan declining slightly

Hong Kong: Stocks mostly advanced in Asia on Wednesday despite losses on Wall Street, while oil prices fell after the United Arab Emirates said it would leave OPEC in a blow to the powerful oil cartel.

US futures edged higher.

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Markets in Japan were closed for a holiday.

Elsewhere in Asia, South Korea’s Kospi rose 0.3 per cent to 6,657.40 and the Hang Seng in Hong Kong gained 1.4 per cent to 26,029.02. The Shanghai Composite index traded 0.3 per cent higher at 4,091.01.

Australia’s S and P/ASX 200 slipped 0.3 per cent, to 8,689.50.

Taiwan’s Taiex lost 0.6 per cent, and India’s Sensex gained 0.4 per cent.

The price of a barrel of Brent crude oil to be delivered in June fell 0.5 per cent to USD 110.71 early Wednesday. Brent to be delivered in July dropped 0.6 per cent to USD 103.74. Brent oil was around USD 70 per barrel before the war began in late February.

Benchmark US crude fell 0.6 per cent to US$ 99.32 a barrel.

The UAE’s departure from OPEC, due to happen on Friday, has been closely watched by oil markets. OPEC accounts for roughly 40 per cent of global oil output, and the UAE is one of OPEC’s largest oil producers. It has pushed back against OPEC production quotas in recent years, wanting to sell more oil to the rest of the world.

“The UAE’s exit will increase (oil) output,” ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note on Wednesday. “The UAE has been increasingly frustrated over recent years by its output being constrained by OPEC production quotas, which have kept it well below its potential.” But as US-Iran negotiations for a permanent end to the Iran war stalled and the Strait of Hormuz, where roughly one fifth of the world’s oil passed through before the war, was still largely closed, short term impacts on oil prices will still depend mainly on prospects for reopening the waterway, analysts said.

The UAE was the third largest oil producer within OPEC before the Iran war. ING said its departure “will reduce OPEC’s effectiveness in managing and influencing the global oil market through supply measures”.

Investors are also awaiting more updates on US-Iran peace talks, although limited progress has been made. Iran has offered to reopen the Strait of Hormuz if the United States lifts its blockade on its ports. So far, the US appears to be ruling out a deal that excludes the Islamic Republic’s nuclear programme.

The Federal Reserve is expected to announce a decision on interest rates later Wednesday.

On Tuesday, Wall Street retreated from its recent record highs. The benchmark S and P 500 fell 0.5 per cent from its latest all-time high to 7,138.80. The Dow Jones Industrial Average edged down 0.1 per cent to 49,141.93, and the technology-heavy Nasdaq composite dropped 0.9 per cent to 24,663.80.

Artificial intelligence -related stocks led the losses. Chip company Broadcom lost 4.4 per cent, Nvidia fell 1.6 per cent and Micron Technology lost 3.9 per cent.

Alphabet, Amazon, Microsoft and Meta Platforms are reporting quarterly results on Wednesday.

In other dealings early Wednesday the US dollar rose slightly to 159.63 Japanese yen from 159.62 yen. The euro was trading at USD 1.1708, down from US$ 1.1712.

The yield on the US 10-year Treasury remained at 4.35 per cent.