Crude prices were trading at multiyear highs on Tuesday, following the breakdown of output talks among the OPEC+ group of oil producing countries on Monday, boosting oil stocks.
Shares in Royal Dutch Shell
rose as much as 2% before settling 0.5% higher in London trading. Fellow major oil company BP’s
stock opened higher and rose as much as 1.3% before paring gains and turning slightly into the red, matching declines on the blue-chip FTSE 100 index.
Crude prices were trading around their highest levels since October 2018, after the OPEC+ group of oil-producing countries postponed a decision on whether or not to increase output. International benchmark Brent
was trading at $77 a barrel while West Texas Intermediate
was near $76 at last check.
“Combined with the rising oil demand driven by easing travel restrictions, the impasse in discussions and inability to find an agreement on increasing supply will provide further support to oil prices to the clear benefit of oil producing nations,” said Jamie Maddock, an analyst at Quilter Cheviot.
Also read: OPEC+ calls off output talks again Monday, leading crude oil prices to surge
“Crucially, it could also provide a challenge to the consensus view that global inflation is simply transitory,” Maddock added. “But for the time being, the oil majors are reaping the benefits, enabling rapid debt paydown and comfortably funding old and new energy investment,” he said.
Shell stock added some buoyancy to the FTSE 100
the index of London’s top stocks by market capitalization, which was down 0.2%, though the index remains near its highs since the beginning of the COVID-19 pandemic.
“The FTSE is outperforming its European peers as heavyweight oil majors lend their support,” said Sophie Griffiths, an analyst at Oanda.
“COVID headlines are also underpinning the U.K. index,” noted Griffiths, after Prime Minister Boris Johnson confirmed on Monday that the end to final COVID-19 restrictions would come on July 19.
“The more domestically-focused FTSE 250
hit an all-time high in the previous session on reopening optimism,” Griffiths added.
Plus: Airline stocks fly higher in Europe as Germany eases travel restrictions on visitors from U.K. and Portugal
Airline stocks, which are sensitive to COVID-19 developments, also got a boost as Germany lifted the most severe travel restrictions on visitors from the U.K. and four other countries. Shares in International Airlines Group
— which owns British Airways — as well as easyJet
stock rose more than 2% before paring gains to fall near 1.5%, after the grocery-delivery company and robotics-logistics group reported half-year revenue and earnings ahead of analysts’ expectations. A key rival to online retailer Amazon
in the British online grocery market, Ocado is also the high-tech logistics partner of U.S. retailer Kroger
Shares in Morrisons
one of the U.K.’s largest supermarket groups and Amazon’s grocery-delivery partner in the U.K., fell 0.2% after the stock was downgraded from outperform to neutral by Credit Suisse. Despite the downgrade, the Swiss bank increased its target price on the shares from 216 pence ($3) to 254 pence, noting the potential for a bidding war as private equity groups circle the company.
Read: U.S. private equity’s pounce on British companies raises alarm in City of London