London close: Big oil merger talk fuels share spurt

Talk of a mega-merger between oil giants BP and Royal Dutch Shell fuelled a bull market in London on Tuesday.

Shares in BP spurted 19.35p to 433.85p and Shell gushed 87p to 2208p as several traders cited market talk of a possible takeover by Shell, although both refused to comment.

The speculation followed tumbling oil prices as Middle East and US oil chiefs go head-to-head in a battle for dominance of the global energy market.

US light crude was about $69 a barrel at the close of trading in London while a barrel of Brent was hovering around $72.5.

Analysts have highlighted the possibility that the drop in prices could trigger falling investment and mergers in the industry.

"BP shares have rallied on the back of enthusiastic buying on talk of Shell's interest in the company," said IG analyst Chris Beauchamp. "But it seems difficult to believe Shell would make such a big acquisition at this difficult time for the oil market."

The talk added about 20 points to the FTSE 100 Index, which closed 85.7 points higher at 6742.1.

Other oil companies benefiting from the chatter included Tullow Oil, up 24.2p at 424.7p, and BG Group, which gained 30.9p to 935.5p.

In economic news, British construction activity dropped to its slowest rate of expansion in more than a year in November, according to data from Markit/CIPS.

European stocks jumped on hopes that the European Central Bank will boost stimulus measures when policymakers meet in Frankfurt on Thursday.

Back in London, confirmation of an agreed takeover of insurer Friends Life by rival Aviva also lifted the mood. Friends Life advanced 8.9p to 375.1p and Aviva increased 0.6p to 500p.

Royal Mail led the Footsie fallers with a 12.6p drop to 405.5p after regulator Ofcom said it was consulting on changing its charges to rivals for using its service, but ruled out regulating direct competitors.

BT rang up 6.1p to 417.9p as rating agency Moody’s said the telecoms group’s potential acquisition of rivals EE or O2 would likely speed up convergence in the UK fixed line-mobile phone market.

TechMARK 2,938.93 +0.53%
FTSE 100 6,742.10 +1.29%
FTSE 250 15,832.95 +0.72%

FTSE 100 - Risers
Tullow Oil (TLW) 424.70p +6.04%
BP (BP.) 433.85p +4.67%
Experian (EXPN) 1,049.00p +4.38%
Royal Dutch Shell 'A' (RDSA) 2,208.00p +4.10%
Sainsbury (J) (SBRY) 241.20p +4.06%
Royal Dutch Shell 'B' (RDSB) 2,292.00p +3.80%
Morrison (Wm) Supermarkets (MRW) 182.90p +3.51%
BG Group (BG.) 935.50p +3.42%
Hargreaves Lansdown (HL.) 989.50p +3.07%
Smiths Group (SMIN) 1,144.00p +2.60%

FTSE 100 - Fallers
Royal Mail (RMG) 405.50p -3.01%
ARM Holdings (ARM) 891.00p -2.68%
Persimmon (PSN) 1,525.00p -0.97%
United Utilities Group (UU.) 899.50p -0.94%
InterContinental Hotels Group (IHG) 2,590.00p -0.69%
SABMiller (SAB) 3,433.00p -0.64%
Johnson Matthey (JMAT) 3,326.00p -0.60%
Smith & Nephew (SN.) 1,090.00p -0.55%
AstraZeneca (AZN) 4,684.00p -0.55%
Burberry Group (BRBY) 1,626.00p -0.43%

FTSE 250 - Risers
Northgate (NTG) 532.50p +9.25%
Afren (AFR) 49.45p +8.30%
Premier Oil (PMO) 199.40p +6.80%
Oxford Instruments (OXIG) 1,222.00p +6.26%
Bwin.party Digital Entertainment (BPTY) 109.50p +6.10%
Soco International (SIA) 286.50p +5.29%
Kaz Minerals (KAZ) 247.40p +5.28%
Cairn Energy (CNE) 166.60p +4.26%
Wood Group (John) (WG.) 620.50p +4.02%
Supergroup (SGP) 902.00p +3.98%

FTSE 250 - Fallers
EnQuest (ENQ) 43.24p -4.15%
Savills (SVS) 633.00p -4.02%
Evraz (EVR) 141.00p -2.89%
Taylor Wimpey (TW.) 130.30p -2.76%
Stock Spirits Group (STCK) 245.10p -2.43%
Enterprise Inns (ETI) 105.40p -2.41%
Barratt Developments (BDEV) 451.00p -2.04%
Paragon Group Of Companies (PAG) 408.00p -1.99%
AL Noor Hospitals Group (ANH) 964.00p -1.88%
Big Yellow Group (BYG) 589.50p -1.83%