Sector Movers: Oil price uptick sends energy stocks higher

A second successive day of oil price rises sent oil and gas stocks higher on Friday, with headline London indices ending the week in positive territory.

The FTSE 100 closed 2.19% or 126.22 points higher at 5,900.01, while the FTSE 250 finished 1.86% or 294.43 points higher at 16,127.99. Overnight, US commercial crude oil inventories increased by 4m barrels during the week ending 15 January, according to the Energy Information Administration, the statistical arm of the country's Department of Energy.

Despite the increase, traders were encouraged that stockpiles at the oil delivery hub of Cushing, Oklahoma, rose by only 191,000 barrels; a figure below levels many market commentators had feared.

Gasoline stockpiles jumped by another 4.6m barrels, although those of other products such as distillates slipped by 1m barrels. Imports of oil fell by 409,000 barrels a day in the latest week, the EIA added. Hopes of further stimulus measures in Europe, China and Japan also strengthened oil prices.

At 1722 GMT, the Brent front-month contract was up 6.74% or $1.97 to $31.22 per barrel, while WTI rose 6.64% or $1.96 to $31.49 per barrel.

Unsurprisingly, Royal Dutch Shell (‘a’ shares up 5.36%/ ‘b’ shares up 5.27%) and BG Group (up 5.09%) led the FTSE 100 higher. Among the midcaps, Tullow Oil (up 14.40%) led the FTSE 250 charge.

Elsewhere, base metals headed higher on the London Metal Exchange. At 1635 GMT, three-month delivery futures contracts of primary aluminium (up 1.8%), copper (up 1.4%), lead (up 1.5%), nickel (up 1.2%) and zinc (up 2.0%) headed higher.

However, mining stocks failed to respond. Analysts at Macquarie Research opined base metals will face major challenges in 2016 with their survey pointing to a further deterioration in the Chinese copper market, even though seasonality is coming into play.

“Looking forward, sentiment on the copper market remains weak across the industry chain, especially from buyers, as they expect demand to continue its seasonal slowing into next month. We begin to see some supply response from medium- and small-sized smelters, but the larger ones are sustaining high utilisation rates,” Macquarie analysts added.

Anglo American (down 8.59%) led the FTSE 100 fallers, with Glencore (down 4.46%) and Rio Tinto (down 1.11%) in close attendance.

Elsewhere, education publisher Pearson was under pressure following bumper gains in the previous session, which saw the stock end up just over 11% as investors welcomed its new restructuring plan.

In the retail sector, Sports Direct (up 6.08%) led the FTSE 100. Marks & Spencer declined after Exane BNP Paribas downgraded the stock to ‘neutral’ from ‘outperform’ and cut the price target to 465p from 580p.

However, Home Retail was given a boost as Exane BNP Paribas raised the stock to ‘neutral’ from ‘underperform’’ and lifted the price target to 150p from 80p, given the likelihood of a bid from Sainsbury’s, but with a lack of visibility over the price.