At about 3 p.m. local time, international crude oil prices fell below $50, reaching a low of $49.24/barrel, the lowest since December 2016. As a result, Pakistan Stock Exchange(PSX) KSE-100 witnessed a fall of 535 points in half an hour. Heavyweights in the KSE-100 index from exploration and production sector like Oil & Gas Development Company Limited (-2.6%) and Pakistan Petroleum Limited (-1.7%) started trading in the red. Shares of oil marketing companies like Pakistan State Oil (-3.3%), Sui Northern Gas Pipelines Limited (-4.9%), and Pakistan Oilfields Limited (-2.5%), amongst others, also fell following the decline in international oil prices.
“These companies carry a significant weight in the KSE-100 and that’s why the market has fallen dramatically,” says Adnan Sheikh, an equity research analyst at Topline Securities Limited. However, he believes that market will not fall below the 49,100 point, and will rebound when it opens on Monday, adding that Friday (tomorrow) is expected to be a dull session.
The decrease in international oil prices is said to be caused by a surplus in the United States’ oil stockpiles. The sharp drop in oil prices dented leading petroleum-linked stocks, pushing both the Dow and S&P 500 into negative territory. ExxonMobil and Chevron both shed almost 2% and Halliburton tumbled 3.2%.
“A rebound in a number of oil rigs in operation points to US oil production rapidly rising on leaner, more efficient technologies,” says Sheikh.