Kuwait bourse plummets as oil crash hits markets

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Oil in worst loss since ’91 Gulf War

KUWAIT CITY, March 9, (Agencies): Kuwait stocks plummeted on Monday extending its rout from the previous session even as the global and regional markets went into a downward spiral. Kuwait’s Premier Market index stopped trading after breaching the 10 pct intra-day drop limit about 45 minutes into the session.

The day’s tumble was precipitated by crash in oil prices following the Saudi move to slash crude prices and ramp up its output.

Oil prices are plunging amid concern a dispute among producers could lead a global economy weakened by COVID-19 to be awash in an oversupply of crude. Brent crude, the international standard, lost $11.44, or 25.3 percent, to $33.83 per barrel in electronic trading in London. Benchmark US crude fell $10.77, or 26.1 percent, to $30.49.

The dramatic losses follow a 10.1 percent drop for US oil on Friday, which was its biggest loss in more than five years. Prices are falling as Saudi Arabia, Russia and other oil-producing countries argue how much to cut production in order to prop up prices.

The turmoil in the oil markets caused share prices to plunge in the Middle East and in Asia. While lower oil prices can be a boon for economies that rely heavily on imports to fuel their industries, such as South Korea, Japan and China, extreme uncertainty can wreak havoc. Demand for energy is falling as people cut back on travel.

The worry is that the new coronavirus will slow economies sharply, meaning even less demand. Stephen Innes, chief markets strategist at AxiCorp, called reports that Saudi Arabia could increase its oil production in order to gain market share in a “shockand- awe” strategy. The oil market has seen arguments like this before.

In 2014, OPEC held off production cuts in order to hold onto market share in the face of a resurgent US oil industry. That led to oil to tumble from over $100 a barrel to below $40 by 2015.

This most recent plummet for oil adds another punch to what’s already been a brutal and dizzying couple weeks for fi- nancial markets worldwide. The US stock market is down 12.2 percent since setting its record last month on worries about how much corporate profits will fall because of COVID-19. It’s set on Monday to mark the 11th anniversary of hitting bottom after the 2008 financial crisis. Treasury yields have plummeted to record lows as investors pile into anything that looks safe, almost regardless of how little it pays.

The 10-year Treasury yield pierced below 1 percent for the first time on Tuesday, only to breach 0.70 percent Friday. The virus usually leaves people with only mild to moderate symptoms, but because it’s new, experts can’t say for sure how far it will ultimately spread and how much damage it will do, both to health and to the economy. The number of cases has reached 109,000 globally, and Italy on Sunday tried to quarantine a region holding more than a quarter of its population in hopes of corralling it. If the number of new infections slows in other parts of the world as it has in China, if the US jobs market remains as solid as it’s been and if all the unease in markets ends up creating just a short-term dip in confidence among shoppers, all this may recede quickly. But those are a lot of potential pain points. “There are more if’s than at any other time in this 11-year bull market,” say strategists at BTIG.

Aramco shares fall
The state oil giant Saudi Aramco saw its shares drop by 10 percent as Riyadh’s stock market opened on Monday, halting trading. The Tadawul market only allows stocks to fl uctuate by 10 percent a day, meaning it halted traded as the market opened. The drop came as global oil prices suffered their worst losses since the start of the 1991 Gulf War.

Other Mideast markets fell as well as the new coronavirus has affected global energy prices and OPEC failed to make a production cut deal with Russia last week. Boursa Kuwait shut down within 30 minutes of opening Monday as stocks again dropped by 10 percent, the third such emergency halt to trading in recent days.

Earlier Monday, coronavirus concerns led Saudi Arabia to cut off air and sea travel to and from nine countries: Bahrain, Egypt, Iraq, Italy, Kuwait, Lebanon, South Korea, Syria and the United Arab Emirates.

That comes after the Kingdom earlier closed off its land borders as well. “Out of concern to protect the health of citizens and residents and ensure their safety, the Kingdom’s government decided to temporarily suspend the travel,” it said in a statement attributed to an unnamed Interior Ministry official.

Saudi Arabia already shut down access to the holiest sites in Islam over concerns about the virus and the COVID-19 illness it causes. The virus usually leaves people with only mild to moderate symptoms, but because it’s new, experts can’t say for sure how far it will ultimately spread and how much damage it will do, both to health and to the global economy.

The new virus has caused major economic disruptions, including in global aviation, which has helped slow demand for oil. An OPEC meeting with Russia last week failed to see countries agree to a production cut.

In response, Saudi Arabia has warned it will increase its production and slash its own prices to claw back market share. That sent oil prices into a free fall, losing some 25 percent of their value. Mideast stock markets followed suit. The Dubai Financial Market saw stocks drop by 8.5 percent in a steep selloff as it opened. The Abu Dhabi Securities Exchange dropped by over 7 percent.

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