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BP and Shell decline as crude remains below $80, but Tullow Oil, Cairn Energy and BG Group rise

Published: 15:53 15 May 2010 BST

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Oil prices fell sharply during the past two weeks amid a freefall in stock markets after the Dow Jones Industrial Average plummeted 1,000 points in the middle of the week and European stocks declined on worries over the debt situation in a number of euro zone states, including Greece, Portugal and Spain. The UK’s FTSE 100 nearly got back below 5,000 before rebounding to the current 5,262 this week.

Qatar’s energy minister blamed the low prices that he said did not “reflect demand and supply” on Europe’s fiscal issues and said that the present trends in the markets caused “nervousness.”

The weakness in the markets caused by Europe’s debt woes and the sharp decline of the Dow Jones index after Citi (NYSE: C) mistakenly sold US$16 billion worth of futures contracts instead of US$16 million spurred crude demand concerns to drive the prices down. July Brent Crude declined to US$78.50/barrel, while US light, sweet crude for June delivery was down to US$72.01/barrel.

Contributing to the decline was China’s rising inflation, which reached 2.8% in April, barely within the government’s annual target of 3%. The increase in consumer prices have raised fears that China could introduce yet more monetary tightening measures after curbing lending and hiking interest rates this year. The country is the world’s second largest energy consumer after the US.

Oil and gas stocks were mixed this week. Shares in BP (LSE: BP) continued their decline amid the ongoing oil spill in the Gulf of Mexico, moving down from just above 550 pence to 530 pence, which is close to the company’s 52 week low of 528 pence. Fellow supermajor Shell (LSE: RDSB) fell from 1,800 pence to 1,779 pence.

Other blue chip oil and gas producers did better. Cairn Energy (LSE: CNE) climbed from 376 pence to 390 pence. Tullow Oil (LSE: TLW) improved from 1,030 pence to 1,108 pence and BG Group (LSE: BG) rose from 1,010 pence to 1,028 pence.

Engineering firms followed with Amec (LSE: AMEC) rising from 764 pence to 829 pence and Petrofac (LSE: PFC) climbing from 1,025 pence to 1,103 pence.

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