Asia markets rally as oil prices bounce

Asian markets rose Thursday with energy firms providing strong support after a surge in oil prices, while the dollar held gains against the yen as a top Federal Reserve official reinforced expectations for further interest rate hikes.

Both main crude contracts soared almost three percent Wednesday after data showed a drop in US inventories almost three times more than forecast, fanning hopes of a jump in demand as the American holiday driving season kicks off.

Traders have also been buoyed by hopes that OPEC and Russia's much-vaunted output cuts that started in January appear to be gaining traction, with the key producers also likely to extend the agreement past its end-June deadline.

All of which is welcome news for oil traders after last week's plunge in prices that came on the back of worries about rising US, Nigeria and Libya output, and a slowdown in key market China.

"We saw the biggest draw in inventories for the year last week with stockpiles down more than five million barrels," said Greg McKenna, chief market strategist at AxiTrader.

"And it looks like OPEC's production cut is finally biting," he added.

Among Asian energy firms Hong Kong-listed CNOOC (HKSE: 0883-OL.HK - news) jumped 1.2 percent and PetroChina (HKSE: 0857-OL.HK - news) climbed 0.4 percent, while Woodside Petroleum (Frankfurt: WOP.F - news) added 0.2 percent in Sydney as Santos (Dusseldorf: STS1.DU - news) gained 1.5 percent. Inpex added 0.8 percent in Tokyo.

Oil prices edged up on Thursday.

Three more hikes?

Jeffrey Halley, senior market analyst at OANDA, added: "With (Other OTC: WWTH - news) the OPEC production cuts almost certain to be extended, oil may well have dodged the worst for now."

However, he warned "it would be premature to call a bottom in prices as US production continues to ramp up along with that of ... OPEC members Libya and Nigeria (who are exempted from the output cuts)".

On equities markets Tokyo ended 0.3 percent higher and Hong Kong jumped 0.4 percent, a fourth-straight gain that puts it near two-year highs.

Sydney added 0.1 percent, Seoul gained 1.2 percent to clock up another record high, while Singapore was 0.4 percent higher. Taipei and Manila also put on strong shows.

Wellington surged 0.9 percent after the New Zealand central bank held interest rates and said it would keep them unchanged for some time as inflation was likely to ease -- but this sent the country's dollar diving 1.5 percent.

Shanghai rebounded from early losses to close up 0.3 percent but shares remain pressured by worries about a government crackdown on leveraged investment as it looks to instill some stability in the volatile market.

In foreign exchanges the dollar held its gains above 114 yen, which it broke Wednesday for the first time since March, after the head of the Boston Fed called for three more rate hikes this year and a further tightening of liquidity.

Eric Rosengren's comments warning the US economy could overheat compare with most forecasts for just two more rate increases this year.

In early European trade London fell 0.1 percent but Paris and Frankfurt each gained 0.1 percent.

Key figures around 0720 GMT

Tokyo - Nikkei 225: UP 0.3 percent at 19,961.55 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 25,125.55 (close)

Shanghai - Composite: UP 0.3 percent at 3,061.50 (close)

London - FTSE 100: DOWN 0.1 percent at 7,375.03

Dollar/yen: DOWN at 114.15 yen from 114.25 yen

Euro/dollar: UP at $1.0879 from $1.0868 at 2100 GMT

Pound/dollar: DOWN at $1.2940 from $1.2941

Oil - West Texas Intermediate: UP 51 cents at $47.84 per barrel

Oil - Brent North Sea: UP 52 cents at $50.74

New York - Dow: DOWN 0.2 percent at 20,943.11 (close)

(AFP)