Sector movers: Resource stocks tumble as oil futures shed gains

The London market was dragged lower on Thursday by resources stocks and insurers, following a decline in oil and metal prices.

The FTSE 100 closed 1.78% or 109.62 points lower at 6,036.70, while the FTSE 250 ended 1.24% or 206.45 points lower at 16,385.16. Oil futures shed spectacular overnight gains, after US oil inventory data finally weighed on trading sentiment.

At 1551 GMT, the Brent front month futures contract fell 2.26% or 93 cents to $40.14 per barrel having risen above $41 overnight. Concurrently, WTI futures fell 1.75% or 67 cents to $37.62 per barrel.

US government data showed the country’s crude stockpiles rose in line with analysts’ expectations. Stocks increased 3.9m barrels to a total 521.9m barrels in the week to 4 March, according to the Energy Information Administration.

Total motor gasoline stockpiles fell 4.5m barrels and distillate fuel stocks dropped 1.1m barrels. Production figures were broadly unchanged.

With many analysts pondering whether the oil market had found a bottom, Goldman Sachs said the recent surge in prices was not sustainable and the rout was not over by any means.

“In the current supply-driven market, demand hasn’t really changed, it takes lower prices to push and keep supply below demand to create a deficit. As a result, higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices,” the investment bank advised its clients.

Away from oil markets, precious metals headed higher in wake of a marginally weaker dollar. The COMEX gold April futures contract rose 0.66% or $8.30 to $1265.70 an ounce cancelling out overnight declines, while spot gold was up 1.02% or $12.82 to $1,266.05 an ounce.

COMEX silver rose 1.39% or 21 cents to $15.58 an ounce, while spot platinum also rose 0.38% or $3.70 to $983.10 an ounce, staying below the psychological $1,000 an ounce level breached on Monday for the first time since October 2015.

However, headline three-month base metal futures headed lower across the London Metal Exchange board, with the exception of the tin (+0.9%) contract, while copper was broadly flat. Stateside, the COMEX copper contract was 0.54% or $1.20 lower at $225/lb.

Predictably, Anglo American (-5.19%) and BHP Billiton (-4.97%) were among the FTSE 100’s biggest fallers, but Randgold Resources (+1.11%) registered gains on higher gold prices. Midcap risers and fallers carried a similar theme, with Tullow Oil (-5.81%) among the biggest fallers, while Acacia Mining (+2.80%) rode high.

Selected oil and gas stocks – Amec Foster Wheeler (+1.90%) and Cairn Energy (+1.87%) coped better with the intraday slump in oil prices owing to respective trading developments countering the decline.

Ophir Energy also rose as it reported a healthy cash balance in 2015 and said its deepwater liquefied natural gas Africa project, Fortuna, was likely to go ahead with final investment decision expected in the middle of this year.

Away from the resource sector, insurers had a mixed session. Aviva rallied after revealing a 20% jump in annual operating profits, supported by the acquisition of Friends Life.

Direct Line slumped, having gone ex-dividend on Thursday. The company was due to pay 18p per share on 19 May, representing a dividend yield of 1.39%.

Hiscox slumped as it sold the Hong Kong division of its Asian business to Well Link Group for an undisclosed fee.

Finally, Morrison Supermarkets declined after the company said annual profits fell more than a quarter and like-for-like sales dropped 2.0%.