Oil prices continue to rise after Tuesday's rally as the amount of reserves released by the United States and other countries fell short of expectations

Hong Kong (AFP) - Asian markets mostly rose Wednesday following a run of weakness but inflation worries and expectations of tighter central bank monetary policy continue to hold traders’ focus as crude extended gains despite US moves to boost output.

Oil surged Tuesday in reaction to news that the United States and other countries would release less from their stockpiles than expected, dealing a blow to hopes of tempering a price spike that is causing inflation to run red hot.

The announcement from Washington, which President Joe Biden said was in conjunction with China, India, Japan, South Korea and Britain, had been flagged well in advance, which analysts said had been part of the reason for a dip in the crude market in recent weeks.

Brent surged more than three percent and WTI more than two percent Tuesday and the buying carried on in Asian trade, with concern now building that OPEC and other major producers will rethink their plan to slowly reopen the taps.

“The release, widely expected, is the proverbial drop in a bucket… and might just lead OPEC+ producers to scale back a bit on what they were planning to pump,” said National Australia Bank’s Ray Attrill.

However, OANDA’s Jeffrey Halley said that while OPEC “refused to be cowed” he did not “expect them to fly too close to the sun and reduce their planned 400,000 (barrels per day) increase next month”.

The rise in oil prices added to concerns that inflation – already at multi-year highs – will continue to rise, putting further pressure on banks to scale back the easy money policies put in place at the start of the pandemic and crucial to an 18-month market rally.

The New Zealand central bank on Wednesday lifted its rates for a second successive month.

But all eyes are on the Federal Reserve, which some observers have said could taper its bond-buying programme quicker than first flagged and hike interest rates next year.

“For quite a while now that extra liquidity hasn’t been going into the economy, it has been going more into the markets,” Matt Maley, of Miller Tabak + Co, told Bloomberg Television.

“The Fed is going to start pulling back on that.”

Minutes from the Fed’s November policy meeting will be pored over when they are released later in the day for an idea about officials’ thinking. Economic growth and jobless claims will also be unveiled along with a closely followed reading on consumer sentiment.

Hong Kong, Shanghai, Singapore, Wellington, Manila, Mumbai, Bangkok and Jakarta all rose but Tokyo, Sydney, Seoul and Taipei dipped.

Investors are also keeping a wary eye on developments in Europe, where several countries have introduced strict containment measures to fight a resurgence of Covid, with Austria returning to a partial lockdown and some fearing Germany, the continent’s biggest economy, will follow suit.

On currency markets the Turkish lira remained wedged close to all-time lows against the dollar after Recep Tayyip Erdogan dug in on his decision to pressure the central bank last Thursday to cut interest rates, despite soaring inflation.

The president is notorious for his unorthodox belief that high interest rates cause inflation instead of helping tamp it down.

- Key figures around 0720 GMT -

Tokyo - Nikkei 225: DOWN 1.6 percent at 29,302.66 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 24,770.76

Shanghai - Composite: UP 0.1 percent at 3,592.70(close)

West Texas Intermediate: UP 0.5 percent at $78.89 per barrel

Brent North Sea crude: UP 0.4 percent at $82.65 per barrel

Dollar/yen: DOWN at 114.92 yen from 115.11 yen at 2230 GMT

Pound/dollar: UP at $1.3385 from $1.3381

Euro/dollar: DOWN at $1.1246 from $1.1251

Euro/pound: DOWN at 84.01 pence from 84.03 pence

New York - Dow: UP 0.5 percent at 35,813.80 (close)

London - FTSE 100: UP 0.1 percent at 7,266.69 (close)