Business Insight

Oil supply fears sees falls in FTSE

Brent crude prices also took a hit after fresh data showed a spike in Chinese diesel and gas exports
Kalyeena Makortoff and Ben Woods

OIL prices were retreating from last week's gains following news that more Nigerian oil could hit the market following a deal with a local militant group that previously launched attacks on Niger Delta oil facilities.

That was on top of another rise in the US oil rig count, which increased by 10 rigs in the week to August 19.

Brent crude prices also took a hit after fresh data showed a spike in Chinese diesel and gas exports, up 181.8 per cent and 145.2 per cent respectively in the month of July.

The moves appear to have extinguished last week's optimism that talks between key crude producers at the end of September could lead to a supply freeze and a subsequent jump in prices.

On the currency markets, the pound was up 0.47 per cent against the dollar at US$1.31, while sterling climbed 0.57 per cent against the euro at €1.16.

UK currency has plunged to 31-year lows against the dollar since Britain's vote to leave the European Union and took a further hit this month when the Bank of England cut interest rates from 0.5 per cent to 0.25 per cent.

Across Europe, Germany's Dax closed down 0.47 per cent and the Cac 40 in France finished lower by 0.33 per cent.

Michael Hewson, chief market analyst at CMC Markets UK, said rate hike talk from US Federal Reserve officials was also pushing stocks into negative territory.

The minutes of the Fed's July 26-27 meeting, published on Wednesday, stated the near-term risks to the US economy had subsided and that an interest rate increase could soon be needed.

"A more hawkish tone from a succession of Fed officials along with a sharp slide in oil prices has seen markets in Europe start the week on the back foot with the FTSE 100 feeling the worst of the declines due to weakness in the mining and oil and gas sectors," he said.

The chairwoman of the US central bank is expected to update economists and central bankers on her view of the US economy at this week's Jackson Hole symposium in Wyoming, which starts on Thursday and ends on Saturday.

"After eight weeks of decent gains it would appear that the lack of any further positive drivers ahead of this week's Jackson Hole central bank symposium has prompted some additional profit-taking today on fairly light volume," Mr Hewson said yesterday.

In UK stocks, house builders enjoyed some uplift after struggling to regain lost ground following the Brexit vote.

Taylor Wimpey was the biggest riser up nearly 4 per cent or 5.4p to 158.7p, while Barratt Developments rose 12.8p at 463.5p.

However, miners were holding the bottom spots on the FTSE 100, as they came under fire from a drop in commodity prices

Fresnillo was down over 5.8 per cent or 114p to 1825p and Randgold Resources closed 330p lower at 8020p.

Oil majors also took a hit, with Royal Dutch Shell B 36p lower at 1974p and BP off 6.5p to 427.9p.

The biggest risers on the FTSE 100 Index were Taylor Wimpey up 5.4p to 158.7p, Barratt Developments up 12.8p to 463.5p, Persimmon up 46p to 1794p, and Berkeley Group up 63p to 2550p.

The biggest fallers were Fresnillo down 114p to 1825p, Anglo American down 35p to 835p, Randgold Resources down 330p to 8020p, and Antofagasta down 19.5p to 545p.

Business Insight

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