Fears of global economic strife fuel oil price dive
GOOD news doesn’t seem to last very long these days – at least not where the price of oil is concerned.
Just hours after prices were lifted on news that the US would delay tariffs on another slew of Chinese products, a toxic cocktail of weak economic data and bulging American oil reserves sent it crashing down.
The value of a barrel of the global benchmark, Brent crude, slid 4.3pc, taking it below the $60-abarrel mark to $58.65.
Traders were reacting to news that Germany’s economy shrank between April and June and figures from China that showed a surprise fall in its industrial output.
These numbers added fuel to worries that the global economy is facing another downturn – and weren’t helped by a weekly monitor that showed the amount of oil being held in the US was higher than analysts had expected.
The sharp fall in the oil price dragged many London-listed firms with it. Cairn Energy’s stock dropped by 7pc, or 11.9p, to 158.7p,
Premier Oil’s fell 9.6pc, or 7.14p, to 67.24p, while Tullow Oil, which only this week was celebrating a huge find in South America, lost 4.1pc, or 8.8p, to close down a 204p. The decline also chipped away
BP and Shell, wiping several billion off the market value of the Footsie’s two energy majors. Shell shed 2pc, or 48p, to close at 2332.5p, while BP fell 1.8pc, or 8.9p, to 498p.
Worries about China’s industrial outlook meant one of the Footsie’s other heavy-hitting sectors, mining, also took a hammering, as the economic powerhouse is the world’s largest consumer of metals. Among the fallers were Anglo
American, which lost 4pc, or 75p, closing down at 1789p, Rio Tinto, which fell 1.4pc, or 56p, to 4061.5p, and Evraz, closing down 5.2pc, or 29p, at 527.4p. It’s little surprise that the wider
FTSE 100 fell by 1.4pc, or 103.02 points, to 7147.88 points.
In another example of what goes up must come down, Sirius Minerals reversed its double-digit jump on Tuesday, which was likely inflated by bargain-hunters scooping up cheap shares, to close down 6.9pc, or 0.66p, to 8.85p.
The company last week delayed putting a bond to the market that will be key to building its huge first-of-its-kind fertiliser mine under the North York Moors.
It plans to raise the cash, worth around £415m, later this year.
It was a mixed day for London’s listed car dealers. Auto Trader’s stock fell by 0.7pc, or 3.4p, to 520.6p, after Daimler and Volkswagen-backed online used car seller Heycar launched in the UK. Meanwhile shares in car dealership Lookers rose by 4.6pc, or 2p, to 46p, despite posting a 40pc drop in first-half profits to £24.9m and warning it will spend £10m in a bid to improve its sales processes. This comes after the City watchdog, Financial Conduct Authority, launched an investigation into its sales practices earlier this year. The news seemed to reassure investors that the company is heading in the right direction. All eyes will be on Xeros Technology Group after it announced a plan to slash jobs and raise up to £10m from shareholders.
This may not sound out of the ordinary, but Xeros’s biggest backer, with around a third of shares, is one Neil Woodford.
The market will be keen to see if the embattled fund manager will be able to assist the company, which specialises in water-efficiency technologies. Shares slumped 9.1pc, or 0.83p, to 8.25p.
AIM-listed miner Thor had a better day than many of its largecap pals, rising 23.8pc, or 0.12p, to 0.65p after it was handed a £124,000 research grant from the Australian government’s Department of Industry, Innovation and Science to cover some of the costs of its activities in the country.