BP and Shell’s share prices jumped in early trading after oil prices rocketed in the wake of a shock cut to the world’s supply of crude.
The Saudi-led Opec consortium pledged to slash 1m barrels from daily production, starting next month. Brent crude jumped 5pc to $84 per barrel following the announcement, but Goldman Sachs said the risk was severe enough to send it as high as $100 by the end of 2024.
BP and Shell both leapt 4pc higher as a result, and the FTSE 100 lifted 0.5pc to a three-week high. The broader energy sector was up 4.3pc, on track for its biggest daily gain in more than four months.
Opec’s decision to cut production by more than 1m barrels per day shocked markets, with economists warning the oil surge threatened to open a new front in the battle against inflation. Saudi Arabia pledged to slash 500,000 daily barrels alone.
The White House said the pledge to cut production was ill-advised, while adding the US would work with producers and consumers with a focus on gasoline prices. Last year, President Joe Biden ordered an unprecedented release from the nation’s strategic crude reserves after Russia invasion of Ukraine.
“Today’s move, like the October cut, can be read as another clear signal that Saudi Arabia and its Opec partners will seek to short circuit further macro selloffs,” RBC analysts said.
Rising oil prices will further challenge Western efforts to tame inflation. “This is another potential factor exerting upward pressure on inflation,” Deutsche Bank analysts said.
12:13 PM
North Sea oil workers vote to strike
North Sea oil contractors will down tools in a dispute over pay that will hamper more than 20 oil and gas platforms.
Unite confirmed more than two weeks’ worth of strike action would take place between April 5 and June 9 as workers at Sparrow Offshore Services stage several multiday protests over pay.
The shut down by 150 offshore contractors will impact contractors at platforms operated by Shell, Habour Energy and Apache.
The workers downing tools include offshore crane operators, crane maintainers, deck crew and the company’s “flying squad” that can be airlifted to different platforms.
Sharon Graham, Unite general secretary, said oil companies had enjoyed a “massive windfall profits so there’s no question that they can afford to give Unite members a decent pay rise”.
Dozens of other companies on the continental shelf are facing the prospect of industrial action as union members prepare to halt work over pay.
11:48 AM
Oil headed to $100 per barrel, analyst predict
The surprise production cut by oil cartel Opec has sparked a flurry of activity this morning as shares in energy companies ticked up as the market digested the coming scarcity.
Analysts said the move would push oil towards $100 a barrel and further bed in inflationary pressures on the economy just as central banks felt they had tamed it.
“Higher prices may curtail some demand for crude as well as exacerbate the stubborn inflation that central banks are trying to combat, adding to recessionary risks,” said Vandana Hari, of analyst firm Vanda Insights.
Francisco Blanch, head of commodity research at Bank of America, said: “Any unexpected 1 million barrel per day change in supply or demand conditions over the course of a year can impact prices between $20 and $25 per barrel.”
Oil futures climbed as much as 8pc on Monday morning to around $79.95 per barrel, on West Texas Intermediate.
11:31 AM
Paris votes to ban e-scooters
Parisians have voted to ban electric scooters from the French capital’s streets, with politicians promising to respect the results of the vote.
The overwhelming result saw close to 90pc of the 103,000 people who voted supporting a ban on e-scooters, which were blamed for three deaths and 459 injuries in Paris last year.
Mayor Anne Hidalgo said the result of the non-binding poll would become a “roadmap” for barring the use of scooters. She said: “The Parisians who spoke overwhelmingly spoke out against self-service scooters.”
Scooters in the city are provided via smartphone apps by companies such as Tier, Lime and Dott. The scooters already have a speed limit cap of around 20kmph, but locals have grown frustrated by the scooters cluttering pavements.
A spokesman for Voi, the Swedish e-scooter company, said: “This is a sad day, not only for the citizens of Paris who have come to rely on shared micromobility services in their everyday lives but also for the whole micromobility industry. It’s regrettable that Paris, a city that has inspired the world by investing heavily in the 15-minute city concept, has now taken several steps back in the fight against car dependency.”
11:06 AM
NatWest sell-off extended by government to 2026
The government has extended plans to sell-off shares of NatWest by two years, meaning it will offload its entire stake in the bank by 2026.
The taxpayer still owns a 41.5pc stake in the lender as a result of the £45bn bailout of Royal Bank of Scotland at the height of the financial crisis.
The deal handed the British state a majority shareholding in NatWest, which the government has gradually been selling off since 2015. It has sold around £3.7bn in stock so far.
The government said it would aim to achieve “value for money for taxpayers” from the share sales.
10:46 AM
Government launches £1.6bn water fund amid anger over pollution
The Government and water regulator Ofwat have announced a £1.6bn funding scheme to boost Britain’s creaking water system within the next two years.
The regulator said it would accelerate delivery of 31 schemes, which will include £1.1bn to improve 250 storm overflows and reduce the number of spills by 10,000.
This will include work to improve the quality of bathing water for wild swimmers in Ilkley and reduce spills into Lake Windermere.
The programme will also invest £400m in installing nearly half a million smart meters, while £160m will go towards reducing nutrient pollution.
David Black, Ofwat chief executive, said: “Substantial investment is needed to address the challenges to our water system of storm overflows, river and bathing water quality and drought resilience. We are pleased that we’ve been able to work with companies and identify significant investments which companies can start well before the next price control period.”
The Telegraph has launched a Clean Rivers Campaign to demand water companies curb pollution of Britain’s waterways.
10:15 AM
Capita confirms it was hit by a cyber ‘incident’
Capita, the outsourcer that holds contracts worth billions of pounds for the NHS and BBC, said it was hit by a cyber attack which caused its computer systems to grind to a halt, Gareth Corfield reports.
The company said this morning it was beginning to restore its services which prevented most of its 50,000 staff from being able to work on Friday as they were unable to log into its systems.
Capita said in a statement to investors that there was “no evidence of customer, supplier or colleague data having been compromised”.
Our IT security monitoring capabilities swiftly alerted us to the incident, and we quickly invoked our established and practised technical crisis management protocols. Immediate steps were taken to successfully isolate and contain the issue. The issue was limited to parts of the Capita network and there is no evidence of customer, supplier or colleague data having been compromised.
Capita said it is restoring access to its Microsoft Office 365 services, used to provide business-critical programs to staff such as spreadsheets, email and word processing software. The group runs outsourced IT services for substantial parts of the NHS, including many NHS Trusts that oversee hospitals as well as some local GP surgeries.
It also holds a £456m contract to collect and enforce the BBC TV licence fee, runs military recruiting processes for the Ministry of Defence. On Friday its staff reported seeing correct passwords rejected by Capita’s IT systems when they tried to log in.
10:08 AM
UK manufacturing activity continues to drop
British manufacturing contracted further in March as companies scaled back and order books remained low, according to an index on business activity.
The Purchasing Managers index fell to 47.9 from 49.3 in February, below earlier estimates. Readings below 50 indicate that manufacturing is falling.
The fall is the eighth time in nine months that manufacturing production has fallen, according to ratings agency S&P, although optimism for the months ahead rose.
“UK manufacturing production fell back into contraction at the end of the opening quarter, as companies scaled back production in response to subdued market conditions,” S&P said.
“Although total new orders saw a fractional increase, this followed on from a nine-month sequence of contraction and suggests that order book levels remain low overall. Declining new export order intakes remain a significant drain on demand, offsetting signs of a modest revival in the domestic market.”
09:58 AM
Cineworld bids to raise $2.3bn to exit bankruptcy
Cineworld has scrapped a sale of its UK cinema chain and launched an effort to raise $2.3bn (£1.9bn) in a restructuring to find a route out of bankruptcy.
The movie theatre operator, which failed amid pressure from the pandemic and Covid lockdowns, said it would raise $1.46bn in new debt and issue $800m in stock to its lenders.
The restructuring deal will reduce its total debt pile by $4.53bn and wipe out its current equity holders.
Cineworld also said it would abandon efforts to carve out and sell its North American and UK and Ireland businesses. The cinema chain had said it would only go through with a sale if it could secure an all-cash bid greater than the potential value of its restructuring deal.
A sales process for its “rest of world” division, which includes its business in Eastern Europe and Israel, will continue. The sale has attracted interest from hedge fund Elliott Management, Bloomberg reported, as well as CVC, according to Sky News.
09:26 AM
Opec at risk of weakening demand
Oil prices hit a 15-month low last month after Silicon Valley Bank and Credit Suisse plunged the banking sector into turmoil, a move analysts say priompted Opec to step in and raise prices.
It is the oil cartel’s second major output cut since October, when it slashed production by 2m barrels per day.
Interactive Investor’s head of investment, Victoria Scholar, said economic factors may well weaken demand for oil over the coming months, however, with the fallout from banking failures still undermining market confidence.
She said: “While Opec+ (Opec and its allies) has intervened to limit supply and support prices, the demand outlook remains uncertain.
“On the one hand, the opening up of China’s economy is releasing a wave of pent-up demand. However, that tailwind is likely to be tempered by weaker demand outside China as the global economy cools. Plus, demand could also soften if there are further fears of contagion from the banking sector volatility.”
09:00 AM
FTSE marches higher
The FTSE 100 has hit its highest level in a month on the back of rocketing oil prices, pulled higher by a surging energy sector.
London’s blue-chip index rose 0.6pc in early trading to stand at 7,674.2 points, with BP and Shell up 4.3pc and 4.1pc respectively.
Meanwhile, theatre chain Cineworld neared record lows after failing to find a buyer for its US, UK and Ireland businesses.
In the eurozone, the Paris CAC 40 index advanced 0.4pc, with TotalEnergies joining its UK counterparts to record a rise of 4pc.
Germany’s DAX index added 0.1pc.
07:34 AM
Good morning
Oil prices soared after oil producers’ unexpected cuts to crude output threatened to deliver a fresh jolt of inflation to the world’s markets.
West Texas Intermediate (WTI) soared as much as 8pc in early trading and stood above $79 per barrel at 7am, while Brent crude shot up almost 5pc to come close to $84.
5 things to start your day
1) JCB chief demands rethink of net zero ban on cars: Lord Bamford says internal combustion engine has a future following climbdown by Brussels
2) Bank of England demands cyber crackdown after Russia-linked attacks: Threadneedle Street orders lenders to bolster defences against hackers
3) Home working deals blow to defence companies in race with Russia and China: Boss of Cobham and Ultra warns of war for talent with big tech companies that offer more flexibility
4) Tony Blair’s son wins backing of America’s richest family: Euan Blair secures support from Waltons for his company Multiverse
5) 3,000 City jobs at risk as UBS prepares cuts after Credit Suisse rescue: Swiss lender expected to cut a third of staff worldwide
What happened overnight
Oil prices jumped on Monday after Saudi Arabia and other OPEC+ oil producers announced a surprise round of output cuts, a potentially ominous sign for global inflation.
Brent oil futures spiked $5.16 to $85.05 a barrel on news output would be cut by around 1.16 million barrels per day, while US crude climbed $4.88 to $80.55.
Meanwhile, Hong Kong stocks opened slightly lower following a strong rally last week, as the big cut in oil output added to inflation concerns.
The Hang Seng Index shed 0.10pc to 20,379.50, but the Shanghai Composite Index added 0.14pc to 3,277.34 and the Shenzhen Composite Index on China’s second exchange rose 0.11pc to 2,127.10.
Tokyo shares opened higher, with the benchmark Nikkei 225 index climbing 0.58pc to 28,203.35 at the open, and the broader Topix index rising 0.57pc to 2,015.01.
Source: https://finance.yahoo.com/news/oil-prices-surge-saudi-production-063416913.html