News

October 25, 2008

That Was The Week That Was … In The UK Oil Equities Markets

By Daniel O’Sullivan

They came, they saw, and they cut – but not by enough. After all the speculation attending OPEC’s emergency meeting that took place on Friday in Vienna, in the end the cartel decided to trim production by 1.5 million barrels per day rather than the two to three million many saw as required to halt the oil price decline. Sure enough, the black stuff just carried on sliding regardless and spot Brent is now trading a US$61 per barrel in New York. News that the price for US$50 per barrel December put options on Nymex more than doubled following the OPEC statement shows that many in the market think the cartel has blown this chance to stop the rot. Yet it seems equity markets have already discounted prices this low or lower, because for the second week in a row the main market oil and gas sector as a whole rose – this week by almost three per cent - even as oil dropped further.

While BP finished the week up two per cent up at 440p and BG Group finished the week down almost one per cent at 717p, Royal Dutch Shell was the outperformer among the integrated majors, up six per cent at 1,427p. Perhaps the thinking is that Shell’s relatively larger refining exposure is a fillip as crude gets cheaper? Elsewhere in the main market notable movers over the week included Salamander Energy, down 25 per cent to 82p, Cairn Energy, down 11 per to 1,580p, Melrose Resources down 20 per...