By Carla Mozee, MarketWatch The oil-and-gas sector slumped
nearly 1%, as losses in crude-oil futures accelerated
LONDON (MarketWatch) -- Oil stocks fell in London on Tuesday,
keeping the FTSE 100 benchmark's overall gains in check, as
expectations for a cut in global oil production came into
question.
The FTSE 100 rose less than two points to close at 6,731.14,
with the utilities, financial, industrial groups contributing to
the meager advance.
But the oil-and-gas sector slumped 0.9% as losses in crude-oil
futures accelerated toward the end of the trading session. Nymex
WTI crude for January delivery (CLF5) fell below $75 a barrel after
news reports first indicated that there was no agreement to cut oil
production at a meeting of officials from Venezuela, Saudi Arabia,
Mexico and Russian oil giant OAO Rosneft .
The officials met in Vienna ahead of Thursday's meeting by the
Organization of the Petroleum Exporting Countries. There has been
speculation that OPEC would decide to cut production to reduce
oversupply of the commodity. A subsequent WSJ.com report indicated
that a compromise to trim production may be near.
Still. shares of oil major BP PLC ended 1.1% lower, Royal Dutch
Shell PLC (RDSB) fell 1%, BG Group PLC gave up 1.2% and Tullow Oil
PLC was off 0.4%.
The "full OPEC summit on Thursday remains the key make-or-break
conference this week," said Tim Evans, energy futures specialist at
Citi, in a note late Tuesday, adding the oil market "may be nervous
on relatively light volume until OPEC announces its policy."
Shares of Kingfisher PLC suffered throughout the session,
falling 4.2% as the home-improvement retailer said third-quarter
profit and sales declined, largely because of adverse
foreign-exchange movements and a weak market in France. Total group
sales at the company, whose brands include B&Q and Screwfix,
fell 3.6% to 2.82 billion pounds ($4.41 billion) during the 13
weeks to Nov. 1. Group retail profit was GBP225 million, hurt by a
GBP13 million cost from translating overseas profits into
sterling.
Supermarket stocks also ended in the red, leaving J Sainsbury
PLC at the bottom of the FTSE 100 as its shares fell 4.4%. Wm.
Morrison Supermarkets PLC gave up 3.3% and Tesco PLC ended 2.8%
lower.
But shares of Petrofac Ltd. turned higher by 1.5%, winning back
a slice of Monday's 26% tumble, which came after the oil-services
firm cut its profit forecast. Deutsche Bank on Tuesday downgraded
Petrofac to a hold rating and Credit Suisse cut its rating to
neutral from outperform, noting Petrofac's outlook for 2015 profit
of $500 million is 27% below consensus expectations.
"Although the moving parts in the guidance are relatively clear,
we feel the main sentiment driver will be the admission that
project execution has fallen well short of management's exalted
record, lowering confidence over the quality of future earnings,"
wrote Credit Suisse analyst David Thomas in a note.
Elsewhere in the resources sector, a deal between commodity
giants Glencore PLC and Rio Tinto to create the world's largest
mining group appears inevitable, sector-merger expert Ian Hannam
has speculated.
"If not today, this deal will happen sometime in the near
future," said Hannam, a former J.P. Morgan Chase & Co.
dealmaker and commodity-merger expert, told more than 20 investors,
Bloomberg News reported on Tuesday. Shares of Glencore fell 0.4%
while Rio Tinto shares ended up 0.3%.
Pound rebound: Meanwhile, the pound regained the $1.57 level
against the dollar, with the greenback stalling in the wake of
mixed economic data. Growth in third-quarter gross domestic product
was raised to 3.9% from 3.5%, but there was an unexpected decline
in consumer confidence in November from October, according to the
Conference Board.
The pound had been lower earlier in the day as officials at the
Bank of England gave largely "neutral to dovish" testimony before
lawmakers, said Ashraf Laidi, chief global strategist at City
Index, in an interview Tuesday.
Bank of England Governor Mark Carney said policy makers have
been focused on the timing and pace of eventual tightening of
monetary policy. He also warned that sluggish growth in the
eurozone presents a downside risk for the U.K. economy.
The pound late Tuesday bought $1.5720 versus $1.5707 late
Monday.
Sterling has been on "a relentless decline since the July pop,"
to around $1.71, said Laidi, adding that pressures against the
currency included Scotland independence referendum in September,
and election success by the UK Independence Party, or UKIP,
increase the chance of a hung parliament after the general election
next year.
If sterling closes the week above $1.5658, it will mark the
first weekly gain for the currency against the dollar since
mid-October, said Laidi.
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