MARKET REPORT: Sliding oil price hurts blue-chips as BP and Shell shed billions

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The slippery price of black gold played havoc with some of Britain’s biggest quoted companies yesterday.

As Brent crude oil fell to a four-year low, effects of four months of sliding prices tore a shred off London firms.

The FTSE loser-board read like a Who’s Who of the major blue-chip oil plays. BP and Shell – two of the biggest firms in Europe – both shed billions, while Tullow Oil was the largest FTSE faller. BG Group and Petrofac also featured among the top ten fallers.

Brent crude price: Yesterday it slipped $2.70 to $82.08, and is now at its lowest level since November 2010

Since hitting $115.59 a barrel on June 19 this year, oil has fallen by 29 per cent. Yesterday it slipped $2.70 to $82.08, and is now at its lowest level since November 2010.

The fall was sparked when Saudi Arabia – still one of the largest global producers – unexpectedly slashed the price at which it sold crude to the US.

This led to fears that more cuts could follow, and saw buyers flee Britain’s listed oil groups. The Middle East giant is determined not to fall behind US shale production, which has ramped up at such a rate that the once fossil fuel-hooked nation may become energy self-sufficient in the near future.

Even by commodity standards, oil has a notoriously volatile price range that has seen it slump as low as $9 a barrel and soar as high as $143.

Jasper Lawler, market analyst at CMC Markets, said: ‘The energy markets are pressing down energy stocks like BP and Shell, which is a weight on the index. The key question is how long Saudi Arabia and other OPEC [oil exporting] countries hold out.

‘If the price drops below $75, they might be forced to cut production, but at the moment they’re just fighting for market share.’

The price of West Texas Intermediate, the other key benchmark rate other than Brent, fell below $80 a barrel for the first time in two years. Tullow yesterday fell 25.4p or 5 per cent to 457.9p. Shares have halved in 12 months. BP skidded 13.3p or 3 per cent lower to 430.4p, while compatriot Royal Dutch Shell shed 57p to close at 2139p, or down 2.7 per cent. BG Group (36.9p off at 999.1p) and Petrofac (31p shy at 1049p) were also among the top ten fallers.

Afren was the biggest FTSE 250 faller, down more than 7 per cent to end the day 5.45p worse at 69.7p. Amec (63p lower at 993p), Ophir Energy (11.6p down at 178.3p) and Premier Oil (14.6p lower at 242p) were among the other FTSE 250 firms knocked.

The slick slippers dragged down the Footsie, which reversed early gains to finish 34 points lower at 6453.97.

The index of Britain’s biggest companies hit 6904.86 points at the start of September, its highest since early 2000, before slumping to 15-month lows in October over fears of economic malaise in the Eurozone and slipping oil prices.

But it wasn’t all bad news among the blue chips yesterday. Associated British Foods, better known to punters as the owner of Primark, rose more than 4 per cent after bucking the High Street blues caused by unseasonably mild weather.

Other retailers, including market darling Next (up 5p at 6440p), have warned that the stubborn mercury has eaten into sales of winter warmers. But Primark dazzled, offsetting more woes in its sugars arm. Shares climbed 112p to 2783p.

Schroders started the day as the top performer following an upgrade from Credit Suisse, but eased to end the day 25p to the good at 2415p.

Today is results day for Marks & Spencer, and chief executive Marc Bolland will be hoping that investors cut him yet more slack as he is expected to unveil another fall in clothing sales. Analysts are expecting a 3.7 per cent slip in sales of general merchandise, the non-food division that includes clothes and homewares. Shares have fallen by almost a fifth in the last year, suggesting that City patience with the Dutchman is flying away. Yesterday they inched up 0.8p to 404.7p.

Glencore, led by the ever-ambitious South African Ivan Glasenberg, started the day strongly, with a gain of more than 3p helping it touch 320p after announcing an 8 per cent rise in coal production. But a fall in zinc output by 6 per cent took the shine off the results, and the stock closed 4.35p down at 310.6p. 

Glasenberg, with a ferocious appetite for mega-deals, was said to be eyeing up Rio Tinto or another transformational merger-come-reverse-takeover – and still only two years since the leviathan-esque tie-up between Glencore and Xstrata finally closed.

The FTSE 250 echoed its bigger brother and ended the day 59.04 points worse off at 15,394.11.

A bullish Credit Suisse note helped listed hedge fund manager Man Group climb 6.4p to 129.8p – meaning shares have put on 47 per cent in the last year.