● Brent crude hovers at 7-month low
● Oversupply concerns rattle oil traders
● European stocks soft, US futures flat
● Chinese equities hit fresh 18-month high

Oil prices are languishing at their cheapest levels in more than seven months as traders remain concerned that an Opec/Russia deal to cut production is being counteracted by increased output from other drillers such as Libya, Nigeria and most significantly, the US.

Brent crude, the international crude benchmark, is down 0.2 per cent to $44.77 a barrel. This follows a 2.6 per cent tumble on Wednesday that took it below $45 for the first time since November.

West Texas Intermediate, the main US contract, is off 0.3 per cent to $42.39, having at one point on Wednesday flirted with $42, its lowest in 10 months.

Both markers find themselves in bear markets, defined as a drop of 20 per cent or more from a recent high.

Investors are becoming increasingly wary about falling crude prices because of the damage they can do to the broader market.

Apart from sliding oil company shares hitting equity indices, traders are keeping an eye out for signs of stress in the energy-related debt sector, which in turn can weigh on banks exposed to such credit.

In addition, some market-watchers reckon that the lower prices go, the more oil-exporting dependent nations may have to raise money from their investment portfolios to buttress their budgets.

Equities
All told, the latest retreat in oil has stalled the recent bull run that took many equity benchmarks to record levels.

Wall Street’s S&P 500 closed on Monday at a peak of 2,453, and index futures suggest it will open Thursday’s session at 2,433, off two-and-a-half points.

London’s FTSE 100, with a heavy energy sector weighting is down 0.4 per cent to 7,420, about 130 points shy of its record close touched earlier this month.

Mainland Chinese stocks gained for a second day, with the CSI 300 index adding 0.6 per cent to a fresh 18-month high, following MSCI’s decision to include many in the index provider’s flagship emerging market equity index.

Forex
The New Zealand dollar is the best performing major currency, adding 0.4 per cent to $0.7255 against its US counterpart after the country’s central bank held interest rates steady on Thursday and surprised the market by adopting a less dovish tone than expected.

The British pound is up 0.1 per cent to $1.2683, recovering from Wednesday’s nine-month low of $1.2596 — the result of diverging commentaries from Bank of England policymakers.

The US dollar index is down 0.1 per cent at 97.49 as the euro adds 0.1 per cent to $1.1175.

Source: ft.com