Oil supply worries trigger economic shockwaves for airlines and exporters Oil prices continued to surge in Asian trading yesterday amid concerns over insufficient supply. By early evening, the price of a barrel of crude oil for April delivery broke US$57 in electronic trading on the New York Mercantile Exchange - after rising above US$56 on Wednesday for the first time. It hit a high of $57.50 before stabilising, but observers warned the price now looked set to reach US$60 because producing countries were out of options for controlling its advance. The Organisation of Petroleum Exporting Countries agreed on Wednesday to raise its output limits by 500,000 barrels per day to a record 27.5 million from April 1 and said it might boost quotas by an additional 500,000 barrels if prices were to stay high. But the move gave little relief to the market. 'Opec is increasing output, but they are already producing above their ceiling and don't have much slack in production as it is,' said Markus Rosgen, an Asia-Pacific strategist at Citigroup. 'The fear is that they won't have enough excess capacity to make much of a difference [to the price].' The most recent price rally was triggered by weekly data from the United States Department of Energy showing a sharper than expected decline in petrol inventories. This followed a depletion of US crude stocks in the past three weeks, which has been blamed on the North American winter dragging on for longer than normal. This means the seasonal dip in demand that usually falls between winter and the driving season may not happen this year. The high oil price was driven by fundamentals and hedge fund speculation, said Patrick Wong, an executive director of Hong Kong's Titan Petrochemicals Group. 'There has been hot money flowing into commodities,' Mr Wong said. 'The International Energy Agency is projecting that oil could average US$50 a barrel and some hedge funds are buying oil options at US$80 to US$100 a barrel levels.' All stock markets in the region, except those in Indonesia and the Philippines, fell yesterday, with airlines and exporters among the worst performers. Samsung Electronics and Toyota Motor, which are among the biggest exporters in the region, dipped 1.4 per cent and 1.7 per cent, respectively. Mr Rosgen said Asian exporters were already expected to see a slight drop in earnings before interest and tax this year because of higher oil and commodity prices while export prices from Asia to the US were also showing a marginal decline year on year. 'This indicates [exporters] have no pricing power. Earnings growth is forecast at 1.9 per cent for the region this year but that is likely to go negative by the end of this quarter already [because of surging energy prices],' he said. 'You can forget Asia as a growth story.' But not everyone is pessimistic, with some analysts noting that so far, oil price gains have had little upward impact on inflation. 'You also need to look at oil prices in terms of what they will do to interest rates,' argued Daryl Goh, a regional strategist with HSBC Securities. 'Asia has a bit of a buffer, since there is a sufficient gap between nominal gross domestic product growth and interest rates. 'I don't see an immediate need for a sell-off in Asian equities as a result of this.'