Sector movers: Oil stocks tank as crude prices drop to three-year low

Sinking crude prices were pressuring oil producers and oil services stocks lower on Tuesday, with West Texas Intermediate (WTI) dropping to a three-year low.

Oil dropped sharply after the world's largest exporter, Saudi Arabia, lowered prices for crude exports to US customers in an attempt to support its market share.

Worries about a global supply glut amid falling demand have also been pressuring "black gold" lower in recent weeks.

Meanwhile, US government data due out on Wednesday is expected to show that stockpiles in the States rose by 1.9m barrels last week.

WTI crude futures were down 2.4% at $76.91 a barrel (bbl) in afternoon trade, having touched a low of $75.84/bbl earlier on. Brent was 2.3% lower at $82.83/bbl.

"The slide in the Brent oil price to $85/bbl has exacerbated the substantial underperformance of the UK-listed exploration and production (E&P) sector relative to the market in recent weeks," said broker Westhouse.

Oil and gas stocks listed on the FTSE 350 were down around 2.2% on Tuesday and have now fallen nearly 13% over the past three months. This compares with the wider FTSE 350 which has dropped just 2.4% during the same period.

FTSE 100 producers Tullow Oil, Shell, BG Group and BP were all registering losses of at least 2%, while smaller peers Ophir Energy, Premier Oil and Afren dropped at least 5% on the FTSE 250.

Oil services stocks such as Petrofac, Hunting and Wood Group also declined.

Nevertheless, in a research report on Tuesday analysts at Barclays said that depressed oil prices are not wholly to blame for the weakness in the E&P share prices as of late, and called for companies to rebuild investor confidence.

"We believe the sector's downturn mainly reflects investors' frustrations with excessive spending and poor expectation management, eroding their enthusiasm for the growth potential that remains," Barclays said.

Top performing sectors so far today

Food Producers & Processors 7,379.41 +2.12%
Tobacco 40,800.95 +1.99%
Forestry & Paper 11,460.73 +1.92%
General Industrials 3,837.95 +0.82%
Life Insurance 7,349.13 +0.78%

Bottom performing sectors so far today
Oil Equipment, Services & Distribution 20,485.64 -3.71%
Oil & Gas Producers 7,435.50 -2.20%
Industrial Engineering 9,230.48 -1.11%
Software & Computer Services 1,118.62 -0.87%
Construction & Materials 3,653.85 -0.78%