London midday: Crude stabilises but oil stocks continue to slide

The UK stock market dropped on Friday as shares in the energy sector dropped after the recent slump in crude on concerns about a global oversupply of oil.

Oil producers and energy services stocks were extending losses made the previous session with crude prices set to register their steepest weekly decline since 2011.

London's FTSE 100 was down 0.6% at 6,680 by midday.

The Organization of Petroleum Exporting Countries decided on Thursday not to scale back their production target of 30m barrels per day despite calls to reduce output amid a supply glut.

Brent crude edged higher to around $73 a barrel after dropping by as much as 7% on Thursday, its worst one-day slide in three years. Brent, which is still set to fall over 9% for the week, could drop as low as $60 per barrel, analysts said.

West Texas Intermediate fell below $70 a barrel on Thursday for the first time since mid-2010.

While oil producers will be directly bearing the brunt of the recent slump in prices, it is also likely to raise the pressure on central banks across the globe currently battling against deflation, such as those in Japan and Europe.

Figures from both Japan and the Eurozone on Friday showed that inflation in both regions slowed further. After adjusted for the recent sales-tax hike, Japanese inflation fell to a 14-month low of 0.9% in October, while Eurozone inflation eased to just 0.3% in November.

Energy stocks continue to sink, travel stocks rise

Oil producers were feeling the impact of the drop in prices with shares in BG Group, Tullow Oil, Shell, BP and BHP Billiton falling sharply on the FTSE 100.

However, FTSE 250 peers Premier Oil, Ophir Energy, Enquest and Afren were registering greater losses amid concerns that smaller firms may not have the scale to mitigate the impact of depressed crude prices for too long.

Meanwhile, energy services stocks were also under pressure, such as Petrofac, Weir Group, Hunting, Wood Group and Amec Foster Wheeler, on the back of fears that developers may scale back their spending budgets.

In contrast, the drop in crude was benefitting shares in the travel sectors on hopes that lower fuel costs will feed into higher profits. Easyjet, IAG, TUI Travel and Carnival were all on the rise.

Retailers were also performing well on hopes that sales on Black Friday will be strong. Kingfisher, Sports Direct, M&S, AO World and Home Retail were among the best performers on the FTSE 350. Investors were also expecting the drop in oil prices to give consumer spending a boost.

Mining giant Rio Tinto was making gains after promising shareholders "sustainable cash returns" in 2015. The company also lifted its coal reserves estimates significantly in the Hunter Valley of Australia.

Market Movers
techMARK 2,930.42 -0.21%
FTSE 100 6,680.22 -0.64%
FTSE 250 15,816.17 -0.46%

FTSE 100 - Risers
Kingfisher (KGF) 309.80p +2.68%
Vodafone Group (VOD) 232.60p +2.31%
St James's Place (STJ) 786.00p +2.08%
Compass Group (CPG) 1,083.00p +1.79%
Sports Direct International (SPD) 655.00p +1.71%
TUI Travel (TT.) 440.50p +1.66%
Marks & Spencer Group (MKS) 488.10p +1.27%
Imperial Tobacco Group (IMT) 2,918.00p +1.00%
Carnival (CCL) 2,722.00p +0.93%
easyJet (EZJ) 1,647.00p +0.86%

FTSE 100 - Fallers
Weir Group (WEIR) 1,756.00p -10.41%
BG Group (BG.) 911.10p -7.66%
Tullow Oil (TLW) 434.60p -6.52%
BP (BP.) 411.30p -3.50%
Smith & Nephew (SN.) 1,097.00p -3.18%
Royal Dutch Shell 'B' (RDSB) 2,194.00p -3.16%
BHP Billiton (BLT) 1,517.50p -3.16%
Intertek Group (ITRK) 2,336.00p -2.95%
Royal Dutch Shell 'A' (RDSA) 2,119.50p -2.73%
Smiths Group (SMIN) 1,151.00p -2.62%

FTSE 250 - Risers
AO World (AO.) 254.40p +9.18%
RPC Group (RPC) 600.00p +3.45%
Pennon Group (PNN) 872.50p +3.01%
Home Retail Group (HOME) 199.00p +2.37%
National Express Group (NEX) 262.80p +2.10%
SSP Group (SSPG) 260.20p +2.04%
Genus (GNS) 1,315.00p +1.86%
Galliford Try (GFRD) 1,203.00p +1.86%
Wetherspoon (J.D.) (JDW) 801.50p +1.84%
Acacia Mining (ACA) 239.50p +1.83%

FTSE 250 - Fallers
Premier Oil (PMO) 190.00p -12.04%
EnQuest (ENQ) 52.75p -9.44%
Ophir Energy (OPHR) 143.50p -9.12%
Hunting (HTG) 577.00p -7.90%
Rotork (ROR) 2,211.00p -7.45%
Fenner (FENR) 239.60p -7.10%
Vedanta Resources (VED) 735.00p -6.73%
Wood Group (John) (WG.) 597.00p -6.72%
Amec Foster Wheeler (AMFW) 929.00p -6.63%
Elementis (ELM) 257.60p -5.95%