RIO Rio Tinto Plc

Shares in Asia were broadly down early Thursday as a rise in U.S. crude-oil inventory and expanding production in Saudi Arabia sent oil prices lower.

Australia's S&P/ASX 200 was trading down 1.0%, while Singapore's Straits Times Index fell 0.6% and South Korea's Kospi lost 0.3%. Japan's market was closed for a holiday Thursday.

Overnight, U.S. crude-oil prices fell 2.5% to $41.71 a barrel, after the Energy Information Administration said inventories of crude rose in the week ended Aug. 5, contrary to expectations of a decline. Crude oil was trading down a further 1% in early Asian trade Thursday.

Separately, Saudi Arabia, the world's largest oil producer, expanded production. The move "suggests a pragmatic effort to maintain export revenues to pay the bills and a determination to maintain market share," said Tim Evans, a Citi Futures analyst.

Among commodities-linked stocks in Australia, Rio Tinto Ltd. was last down 0.8% at A$49.57, while Fortescue Metals Group lost 1.1% at A$4.53.

The developments in oil markets overshadowed another rate cut in the region.

New Zealand's central bank on Thursday cut the official interest rate by a quarter of a percentage point to a record low of 2.00%, indicating further reductions are likely to push consumer-price inflation higher and tame a strong New Zealand dollar.

"The market had already priced in a rate cut and there was sufficient speculation that a 50-basis-point cut was on the cards," said Alex Furber, a senior client services executive at CMC Markets.

The disappointment pushed the New Zealand dollar 1% higher against the U.S. dollar in morning Asian trade. The Kiwi has risen 6% against the greenback so far this year.

Elsewhere, the Bank of Korea kept its base rate unchanged for a second straight month, as widely expected. The South Korean central bank held the benchmark seven-day repurchase rate steady at a record-low 1.25% on Thursday.

"Better fundamental data is likely to have prompted the BOK to employ a wait-and-see approach," said Dwyfor Evans, head of macro-strategy for Asia Pacific at State Street Global Markets.

Meanwhile, China's banking regulator Wednesday cut the ratio of bad loans at commercial banks in the second quarter from preliminary data it released last month.

This helped in part to support mild gains in the Shanghai Composite Index, which was last up 0.3%, though the rise was capped following the market's recent strength.

"There are no real factors that should sustain a continued rally," said Fang Yan, an analyst at Guosen Securities. With the index already over the 3000-point mark, it shouldn't move very much beyond that for now, he said.

In currencies, China's central bank strengthened the yuan fixing by its biggest margin since June, moving the benchmark for trade against the dollar to 6.6255 from Wednesday's 6.6530, translating to a 0.4% appreciation of the yuan. The adjustment followed the overnight fall in the U.S. dollar index.

The dollar is weakening as the market is now pricing in just a 12% chance of a rate increase in September by the U.S. Federal Reserve, down from 15% earlier, according to Fed Fund futures price data from CME.

Jenny Hsu, Riva Gold, Kate Geenty, Grace Zhu, Kwanwoo Jun and Ewen Chew contributed to the article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

August 10, 2016 23:45 ET (03:45 GMT)

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