Oil majors save FTSE from heavier losses after Opec moves to slash production

Decisions taken by oil-producing countries in Vienna helped save London’s FTSE 100 from a sharper drop on Wednesday as BP and Shell saved the index from the malaise seen elsewhere around the world.

By the closing bell the index had dropped 0.5% as both London oil majors saw their shares rise by well over 1%.

It was a 34-point fall to 7,053.

It came after Opec+, a group of oil-producing nations that includes Saudi Arabia and Russia, decided to sharply cut production.

The move is a bid to prop up oil prices, which have been falling recently.

It will help the top lines of these countries, but also have a knock-on effect on US and European oil companies.

As a result the oil that BP and Shell sell is likely to fetch a slightly higher price.

“Equities have faltered after two days of gains, but Opec’s move to lop off a slab of daily oil output has resulted in a rally for crude prices,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“Equities are eating into the gains of the past two sessions, with Opec’s decision to go for a big cut in output has not helped the buyers to keep control.

“The prospect of two million barrels of daily oil output being eliminated raises the spectre of inflation again, just as the market began to hope that oil prices at least had calmed down.

“Of course, high volatility is a given at this point and stocks are still firmly up on where they were two days ago, but this bear market bounce is looking very shaky after just 48 hours.”

But the decision was less immediately impactful than Opec might have hoped, Mr Beauchamp said.

The price of Brent crude oil had risen less than 2% to 93.57 dollars per barrel shortly after markets closed in Europe.

In Europe the German Dax index closed down 1.3% and the Cac 40 in Paris dropped 1%. Wall Street’s S&P 500 was down 1.3% and the Dow Jones down 1%.

At the same time the pound was trading at a little under 1.13 dollars and somewhat over 1.14 euros.

In company news, Tesco said its half-year profits fell as shoppers tighten their belts by choosing cheaper products from the supermarket.

The business said it is facing “significant” inflation and warned that annual earnings will be towards the lower end of previous expectations.

Underlying retail earnings are expected to be between £2.4 billion and £2.5 billion. The supermarket had previously expected the higher end to potentially reach £2.6 billion.

Shares dipped by half a percent on Wednesday.

The biggest risers on the FTSE 100 were Shell, up 40.5p to 2,378.5p, Auto Trader, up 8.6p to 544.4p, Haleon, up 4.25p to 278.45p, BP, up 5.7p to 460.2p, and London Stock Exchange, up 72p to 7,790p.

The biggest fallers on the FTSE 100 were Ocado, down 50.9p to 456.1p, Next, down 268p to 4,762p, St James’s Place, down 53p to 1,029p, Unite Group, down 41p to 839p, and Sainsbury’s, down 8p to 172.2p.