Asian stocks rose yesterday as oil prices eased after OPEC said it would boost output of crude if the Middle East crisis hit supplies, while traders picked up cheap stocks after a week of losses.
Tokyo gained 0.71 percent, or 74.05 points, to end at 10,526.76, and Sydney ended 0.57 percent, or 27.2 points, higher at 4,836.5. Hong Kong also rose 1.82 percent, or 411.33 points, to 23,012.37, after four straight day of losses, and Seoul climbed 0.69 percent, or 13.54 points, to 1,963.42.
Taipei rose 0.68 percent, or 58.01 points, to 8,599.65.
In other markets, Manila gained 0.17 percent, or 6.2 points, to 3,737.04, while Wellington edged down 0.13 percent, or 4.44 points, to 3,363.91, and Shanghai slid 0.03 points to 2,878.57.
The recent oil price rally was halted after OPEC said it would increase production to make up for any losses caused by the turmoil in oil exporter Libya.
Saudi Arabian Oil Minister Ali al-Naimi said his country would increase output, according to oil specialist Platts.
Brent North Sea crude for delivery in April was down US$0.47 to US$110.89 after almost hitting US$120 on Thursday.
New York’s main contract, light sweet crude for April delivery, fell US$0.40 to US$96.88 per barrel.
Global stock markets have fallen over the past week as uprisings across the oil-rich Middle East sparked fears crude costs would go up, putting pressure on inflation as many countries struggle to keep a lid on prices and weighing on the economic recovery.
“With food prices already at very high levels, the last thing the global economy needs now is soaring energy prices,” said Khoon Goh, a senior economist at ANZ Bank in Wellington.
“Such a combination will surely present a real inflation challenge for central banks around the world,” he told Dow Jones Newswires.
Deutsche Bank said earlier this week that oil above US$120 a barrel would be an inflection point for global economic growth. At that price, oil as a share of global GDP starts to move above 5.5 percent, historically a point where global growth has come under pressure.
Emerging Asia, which led the world’s recovery from the global financial crisis, is already trying to deal with escalating food prices. Higher oil prices will add to the dilemma for policymakers of how to contain inflation and support economic growth.
Yet another complication is that while the crude price spikes this week reflect a supply-side risk, oil prices were already rising as economic activity around the world picked up pace.
“The global recovery is ongoing, it is gaining more traction but the developments in the crude-oil sector as a result of the turmoil in the Middle East is putting to question the strength of that recovery,” said Jose Mario Cuyegkeng, economist at ING in Manila.
Since most countries have little control over the world price of oil, raising interest rates would not address the issue for their economies. However, higher fuel prices could feed through to other prices, such as transport, and inflation expectations.
“The environment influencing inflation is now much more difficult than what we had expected at the end of last year,” South Korean Vice Finance Minister Yim Jong-yong said.
Indonesian central bank Deputy Governor Hartadi Sarwono said he expected a recent drop in food and commodity prices to push monthly inflation down in the country, but oil was a risk.