The price of a barrel of Brent fell to $70.96, a fresh four-year low, following oil cartel Opec’s decision yesterday to maintain production targets in the face of oversupply.
Dominic Rossi, Fidelity’s global chief investment officer, said: “Oil prices, which peaked at $140 in 2007, have now almost halved. Shale gas, a strong dollar and a weaker Chinese economy are reversing the trends seen across capital markets in the past decade.”
The Saudis, the leading force in Opec, are reportedly happy to ride out the price slump in favour of maintaining market share. By putting further pressure on prices, US shale gas minnows, who contributed to oversupply, may also be squeezed out of business.
But the move is hitting big as well as small producers. The oil and gas industry was responsible for knocking a collective 40.93 points off the blue-chip index today.
Mike McCudden, head of derivatives at Interactive Investor, warned: “Cheap oil should continue to stave off inflationary pressure but the suffering oil majors and minors will act like a ball and chain for indices in the short term.”
The winners were those in the petrol-guzzling travel sector, with cruise operator Carnival rising 26p to 2722p, TUI Travel improving 5p to 438.3p, easyJet soaring 24p to 1656.5p and British Airways-owner IAG climbing 2.9p to 460.8p.
The airlines were also helped higher by hopes that Scotland could be handed control of air passenger duty, with the SNP committed to cutting or even scrapping the tax. The FTSE 100 sagged 44.31 points to 6679.11.
New Britain Palm Oil wobbled down 17.5p to 675p as investors fretted over the path of its £1.1 billion takeover by Sime Darby. The Malaysian conglomerate has extended the deal’s offer period to give the European Commission more time to examine the takeover. The announcement came as New Britain revealed a rise in nine-month sales to $503 million (£320 million), from $431.3 million a year earlier.
Chemical giant Croda dipped 7p to 2457p as it lured Jez Maiden away from his desk at National Express to be its new finance director.
Urban regeneration and housing specialist MJ Gleeson climbed 20.75p to 366p after it said it would beat market expectations for the year thanks to a forecast record increase in completions.
Hochschild Mining fell 2.9p to 95p as it said it was cutting production targets at two of its Peruvian mines in a bid to save cash amid weaker silver prices.Reuse content