FTSE 100 shares almost wiped out their gains on Wednesday after an “on paper” deal was struck by OPEC members to cut oil supply by 1.2mln barrels a day.
While the deal’s country-by-country details remain to be made public and some investors have doubts about enforcing the cuts , the key obstacles for pro-cut Saudi Araba – Iraq and Iran – have apparently been appeased. It is the first cut from the oil cartel since the financial crisis started in 2008.
The FTSE 100 index closed up 0.2% at 6783 – just 11 points above the previous closing level – having spent the entire session dribbling above the neutral level for the day. Shares managed to avoid losses.
Unsurprisingly, the top gainers were Royal Dutch Shell (RDSB) whose A and B shares series topped the FTSE 100 gainers, with a 4.3% charge to 2118.5p, followed by BP (LON:BP.) up 3.8% to 459.45p.
The mid-cap FTSE 250 index closed up 0.08% at 17545 and led by energy stocks Cairn Energy (LON:CNE) up 14.6% to 209.4p and Tullow Oil (LON:TLW) up 13.3% to 297.8p.
The FTSE AIM 100 Index of small-caps closed up 0.1% at 3932 and the FTSE AIM All-Share Index up 0.1% to 819.
Underscoring how Wednesday’s rally was contained to oil stocks, the overall London bourse gainers amounted to just 28% and losers 33%.
Late session
FTSE 100 up around 38 points to 6,843
RBS fails financial stress test and shares fall
OPEC to cut output by 1.2mln barrels
FTSE100 was off its best as more details emerged from the OPEC meeting in Vienna.
According to Reuters, the oil producers' cartel has agreed to curb output with Saudi Arabia to reduce production and Iran to keep its pre-sanctions allocation.
In total, the plan, put forward by Algeria, will see production fall by around 4.5% or about 1.2 mln barrels per day. If it is carried through, and it;s a big if, it would be the first cut in OPEC's output for eight years.
The London index rose by 36 to 6,806. Oil was up 6.8% to US$48.30 but gold shed US$12 to US$1,179.
14:45: Oil prices rise above US$50 on OPEC deal reports
Reports coming out of Vienna say that OPEC has agreed to its first cut in production since 2008.
Details of just how much the cartel will cut or how much specific members will forego have yet to emerge.
But, according to Reuters, Saudi Arabia is prepared to take “a big hit” and agree to Iran freezing its quota at a pre-sanction level.
Brent crude rose more than 7% to trade above US$50 per barrel, while West Texas Intermediary gained 6.75% changing hands at US$48.50.
12:30: FTSE 100 higher at lunch as OPEC optimism mounting
A couple of other notable movers so far on Wednesday include Webis Holdings PLC (LON:WEB) and Zoopla Property Group PLC (LON:ZPLA).
Investors were pulling their cash out of Webis after the gaming and technology group revealed that it had recorded a lower profit on higher revenues.
Group turnover for the year to May was US$224.3mln compared to US$154.4mln a year earlier, although gross profits fell to US$4.1mln (2015: US$4.2mln).
Webis blamed “the cost of staying competitive” as the reason for the downturn in profitability, as well as the cost of keeping up with compliance and regulatory requirements around the world.
Elsewhere, Zoopla built on its recent rally as it added another 7% to its share price.
The online property firm announced buoyant full-year results, with revenue soaring by 84% to £197.7mln.
12pm
FTSE 100 is up over 64 points at the midday point, as markets are buoyed by the potential of an OPEC deal.
The price of crude is surging on the speculation with US benchmark West Texas Intermediate up 7,125 to US$48.45 per barrel.
There are noises coming from Austria’s capital where the cartel is meeting that a deal to curb production may be on the cards, which will be a boost to prices.
On the one hand today sees a rally in the price of oil but if there is no OPEC consensus, commentators believe the price of crude could tumble again.
READ - Oil rises as OPEC gathers for pivotal negotiations
Royal Dutch Shell plc (LON:RDSB) is basking in the potential at the moment and is top gainer on Footsie, up 4.18% to 2,116p. The biggest laggard on the blue chip exchange is services giant Capita PLC (LON: CPI), which plunged 5.34% to 527.75p.
It comes after broker RBC cut its target price to 500p from 600p as it issued a very downbeat view of the shares and bank HSBC also downgraded it to 'reduce' from 'hold' and axed its price target to 450p from 1,020p.
Royal Bank of Scotland Group plc (LON:RBS) is still down in the doldrums after failing the BoE's stress test, underlining its vulnerability should a financial crisis hit. Shares lost 2.89% to 191.30p.
Read Proactive's story here: RBS shares hit as it fails BoE's crisis test
10am
Britain's blue chips are up around 27 points mid-morning with big oil groups putting on a spurt on the back of hopes of a deal the OPEC meeting.
FTSE 100 is up 0.55% to stand at 6,799 at the time of writing with Royal Dutch Shell (LON:RDSB) up 3% to 2,092p and BP (LON:BP.) gushing 2.35% higher at 453p.
The Organisation of the Petroleum Exporting Countries is due to meet in Vienna, Austria this morning with a press conference due at 3pm.
The market is hoping the group may decide to curb production in a bid to lift lagging prices of crude, due to the oversupply.
But we have been here before and previously Iran and Iraq have disagreed with the largest producer Saudi over how consensus can be reached.
Top laggard on FTSE 100 is state-backed bank RBS (LON:RBS), whose shares fell over 4% to stand at 188.20p after it failed a Bank of England stress test and must bolster its balance sheet.
In small caps, miners were gaining ground, with Bezant Resources (LON:BZT) shooting up over 40% as it revealed initial gold and platinum had been recovered from the exploration processing plant at the FKJ 083 licence area in Colombia.
Also higher was Anglesey Mining plc (LON:AYM, which added almost 27% to 4.13p after it issued shares to institutions and raised funds to back its Parys Mountain development plans. The base metals project lies in north Wales.
9am ...FTSE 100 heads higher despite RBS stress test failure
FTSE 100 made good ground despite the shock of Royal Bank of Scotland (LON:RBS) failing the latest Bank of England stress test.
The index was up 39 at 6,811, though RBS was one of the main fallers as it announced plans to bolster its capital positon by £2bn.
The state-owned bank had been expected to pass and also faces the possibility of a huge US fine for mortgage-backed securities mis-selling while it still can’t get rid of its Williams & Glyn banking business.
Shares fell 2.6% 191.8p.
Other banks fared better. Lloyds and HSBC passed though Barclays and Standard Chartered (LON:STAN) both had some concerns in the scenario of the global economy contracting by 1.9%.
Lloyds, which is still partly owned by the taxpayer, rose by 0.8% to 58.1p
6.51...FTSE 100 to open quietly as OPEC takes centre stage
The conclusion of the latest OPEC meeting will hold centre stage today with London set for a quiet start to see if some kind of deal on oil production is forthcoming.
Early indications from the spread betters are that FTSE 100 will shed around five points from yesterday’s close of 6,772, but it is so slight a move it could easily change direction.
Don’t hold your breath about OPEC coming up with anything concrete is merchant bank Goldman Sach’s view, which ascribes only a 30% probability.
Analyst Damien Courvalin said: “If the proposed OPEC production cut to 32.5 mb/d is agreed to, we would expect prices to rally to the low $50s/bbl, with observed implementation required to support prices further.
Brent crude rose to US$45.95, up 1.5%.
Elsewhere, there will be a raft of UK bank updates as they report whether they have passed the latest round of financial stress tests. Expect even Royal Bank of Scotland to sail through comfortably.
US markets generally made gains with the Dow Jones Industrial Average adding 23 points to 19,1221 and similar gains for Nasdaq and the S&P 500.
Asian markets were mixed with the Nikkei in Tokyo flat, losses in Shanghai and decent gains in Hong Kong.
Headlines
Ofcom has been forced to appeal to the European Commission for support legally separating BT from its network division, Openreach. – Telegraph
Officials from Opec’s top oil producers were scrambling to salvage a deal to curb production last night with big differences between Saudi Arabia, Iran and Iraq - Times
Britain's main power link to France was partially severed during Storm Angus and will not be fixed until February, National Grid has revealed, exacerbating fears of a power crunch this winter – Telegraph
Co-Operative Energy is to acquire the 160,000 customers of defunct supplier GB Energy and honour their existing deals – Telegraph
Commodites/rates
US$/£ - 1.2478 -0.1%
Gold - US$1,191 flat
Oil - US$45.95 +1.5%