A weakening oil price meant BP and Royal Dutch Shell remained under pressure despite a steady start to the year for the FTSE 100 Index. BP shares topped the fallers board with a decline of 1.5% as the price of Brent crude slipped to $56 a barrel due to ongoing fears of a supply glut.
The London market’s festive rally came to an abrupt halt today amid lower oil prices and fresh uncertainty over Greece’s future in the euro. With the FTSE 100 Index 57.6 points lower at 6575.9, the top flight is on course to complete its first negative session since December 15. Commodity firms dominated the fallers board after the price of Brent crude oil dived to a five-and-a-half year low of near to 57 US dollars a barrel.
Commodity-based stocks were lower - causing the top flight index to slump by 38.6 points to 6595 - after the price of Brent crude oil dived to a five-and-a-half year low of near to 57 US dollars a barrel. The latest fall in the price of oil was accompanied by fears over the eurozone outlook after Greece was forced to announce early national elections due to the failure of the country’s politicians to elect a new president.
Oil’s slump has almost doubled the value of India’s big, state-owned refiners, outpacing the rest of the industry from China to the US. The companies had been forced to make a large proportion of sales at below cost for over a decade. Now, they can profit from fuels after India’s new government saw its opportunity in falling oil prices to deregulate the market without bothering its inflation targets. OPEC’s decision to sit on its hands in the face of an oil glut has only accelerated share gains.
The London market picked up where it left off before Christmas as strong trading among mining stocks helped the FTSE 100 Index to more gains. A strong session for Asian markets overnight and a modest recovery in the price of Brent crude oil to about 60 US dollars a barrel ensured the likes of BHP Billiton, Rio Tinto and BP were in positive territory. Amid thin trading volumes, the FTSE 100 Index was higher for an eighth session in a row - up by 14.5 points at 6624.4.
Having reached 2014 highs in June, crude oil prices started to free fall and in the search for reasons some people have pointed towards the International Energy Agency's (IEA) changing demand and supply expectations. Since June, when its 2014 global oil demand growth forecast hit a peak of 1.4million barrels per day (bpd), IEA’s projections have fallen by half. By contrast, supply expectations have been much more stable – since June, the IEA's forecasts of non-Opec (Organisation of the Petroleum Exporting Countries) oil supply growth have expanded by a modest 300,000bpd and the IEA's non-Opec supply forecast is currently only 100,000bpd above the level at which it started 2014.
The boss of Danish conglomerate A.P. Moller-Maersk has warned the group’s oil division will have to close some sites and cut operating costs if oil prices remain at their current level. Nils Smedegaard Andersen, chief executive, said that if prices stay around $60 per barrel, it will reduce revenue in the oil unit by one-third from the level of 2013. He added: “As all costs, except taxes, are fixed it is obviously something we have to take very seriously. And we would have to do some things.”
Nabors Industries Limited (NBR) Chief Executive Officer Tony Petrello, the best-paid oil executive in the US, and his finance chief are getting salary cuts as the world’s biggest land-rig contractor confronts an industry downturn. Petrello’s base salary for the first half of next year will be pegged to an annual rate of $1.53 million, a 10% cut from the current $1.7 million. Chief Financial Officer William Restrepo is also getting a 10 percent cut in his annualized base salary, to $585,000, over the same period, the Hamilton, Bermuda-based company said today in a federal filing.
A summit which aims to bring together governments, trade unions and industry bodies to save jobs in Scotland’s oil capital has been announced. Jenny Laing, leader of Aberdeen City Council, has called on the Scottish and UK Governments to attend the summit on the North Sea oil industry which is struggling under plummeting oil prices. Labour has pledged to send its leader Jim Murphy and has urged First Minister Nicola Sturgeon and Prime Minister David Cameron to attend.
The FTSE 100 Index completed its best week in three years today - just a week after its worst in three years. London’s top-flight was up 3.9% after recent market jitters were assuaged by indications from the US Federal Reserve that while the world’s largest economy is improving there will be no hurry to raise interest rates. The FTSE 100 has enjoyed its biggest weekly climb since December 2011, adding £62 billion to the value of its constituent companies.
Investors betting on a rebound in oil prices are nothing if not tenacious. They have poured the most money in more than four years into exchange-traded products that track oil as prices fell 18% this month. It’s the third consecutive month that the four biggest US funds have received money, during which time futures have plunged 41%.
North Sea “close to collapse” says the man from Brindex. I am of course referring to remarks made to the BBC by its chairman Robin Allan, who then goes on to say that the UK’s offshore industry has been in such territory before. The 1986 oil price crash was a shocking event and did terrible damage at the time. However, it also marked the start of a turning point as the North Sea gradually started to mature. Various initiatives in the 1990s designed to tackle key issues like rocketing costs helped and they were timely given the next slump that started with a gradual oil price slide in 1997, bottoming out in late 1998 at less than $10 a barrel for a few days.
The UK’s oil industry is “close to collapse” but the falling oil price could have a net benefit to the UK economy, according to experts. Robin Allan, chairman of the independent explorers’ association Brindex, said it is “almost impossible to make money” with the oil price below 60 US dollars (£38) a barrel and there will be no new investments. But accountants PricewaterhouseCoopers (PwC) said the falling oil price “should be a net benefit to our economy as a whole, even if there is some losers in the UK oil and gas sector and in particular places like Aberdeen”.
The FTSE 100 Index held on to strong gains in the previous session today as a bullish start for Wall Street and an oil price bounce helped blue-chip shares recover from earlier turbulence. A volatile session on Tuesday hit by jitters over the price of oil and the slide in value of the Russian rouble had seen the index close 2.5% ahead. The latest session saw it earlier fall by nearly 100 points but recover to close 4.6 points up at 6336.5. Oil climbed back above the 60 US dollars mark for a barrel of Brent crude.
Volatility for world markets continued today as the FTSE 100 Index put back a large chunk of the 2.5% rise seen in its previous session. Oil prices steadied at 60 US dollars for a barrel of Brent crude but this was not enough to prevent another weak session in Europe as confidence was hit by the continued financial crisis in Russia. The FTSE 100 Index stood 45 points lower at 6287.1, having rebounded by 2.5% or 149 points at the end of choppy trading yesterday.
The “big four” supermarkets are all cutting their fuel prices. With world oil prices plunging, Asda, Sainsbury’s, Morrisons and Tesco are all reducing their petrol by 2p a litre and their diesel by 1p a litre from tomorrow. The Asda cut means its customers will pay no more than 110.7p a litre for petrol, with the company’s diesel costing 117.7p a litre.
Nigeria’s two oil unions are set to meet with government officials for talks today as an indefinite strike aimed at curbing local fuel supply and exports entered a third day in Africa’s biggest crude producer. The impact of the strike has been restricted to domestic fuel supply with oil lifting and export terminal operations unaffected at the moment, Francis Johnson, president of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said from Lagos, the commercial capital. Union leaders will hold talks with the authorities today in Abuja, the capital, he said.
A volatile session saw the FTSE 100 Index fluctuate between positive and negative territory today as the fall-out from falling oil prices continued. Brent crude dipped below 60 US dollars a barrel for the first time since 2009, meaning the energy industry benchmark is now down by about 50% since the summer amid concerns about weakening demand and oversupply. The slump has been worst felt in Russia, where a sudden hike in interest rates from 10.5% to 17% overnight failed to prevent a fresh decline in the value of the rouble, which stood at a new record low.
Armada Oil has terminated the terms of its existing credit facility amid the recent decline in oil price. The firm said it was working with its current lender to secure an extension of the terms of its existing credit facility and expects a resolution before the ed of the year. The loss of its financial facility has also halted work on the Bear Creek #1 project.
Crude oil prices are poised to fall below half where they were six months ago, before producers begin dealing with a global glut. Brent, the global benchmark, will slide to as low as $50 a barrel in 2015, according to the median in a Bloomberg survey of 17 analysts, down from the $115.71 a barrel high for the year on June 19. The grade has already collapsed 47% since then and needs to fall further before producers clear the current glut, said five out of six respondents who gave a reason.
Argentina is depending on two things to reverse a three-year energy shortfall that’s costing $6 billion a year: a shale formation bigger than Massachusetts and Miguel Galuccio, who has worked on drilling operations from North Dakota to Poland and India. President Cristina Fernandez de Kirchner appointed Galuccio chief executive officer of YPF SA (YPF) in 2012 after she seized control from Spain’s Repsol SA. Since then, Galuccio has tripled investment in the state-run oil company in an effort to reverse a decline in output that’s led to crippling energy shortages and drove Argentina’s energy imports to record highs. As oil prices plunge below $60 a barrel and global producers revise their spending, Galuccio is sticking with a strategy for the Vaca Muerta shale formation that relies on foreign partners with a long-term view.
The problem with the UK’s North Sea oil sector is that its production costs are higher than those in most other world regions and have been spiralling upwards at an alarming rate for the past 10 years.
Crude prices came under renewed pressure yesterday, and Brent hit five-year lows of nearly $60 a barrel after producer group Opec said it would stick to its decision not to cut output despite fears of a world awash in oil. Brent and US oil initially extended last week's rout, which wiped more than 10% off global crude prices. They were up in New York's Monday morning trade after news that Libya's two biggest oil ports had shut due to fighting between armed factions allied to the country's two rival governments. Loading delays for January cargoes of North Sea Forties crude due to lower-than-expected output was also positive for oil. The North Sea Forties set prices for Brent.
Oil fell $2 a barrel to plumb new five-year lows yesterday after the world's energy watchdog forecast even lower prices on weaker demand and higher supplies next year. Benchmark Brent oil tumbled to below $62 a barrel and US crude slumped to under $58 to extend Thursday's landmark fall below $60.
Oil extended losses below $60 a barrel amid speculation that OPEC’s biggest members will defend market share against US shale producers. Brent also slid after closing at the lowest price since July 2009. West Texas Intermediate futures fell as much as 1.9% in New York and are down 10% this week.