Oil rises again as market casts doubt over effectiveness of strategic reserve release, and Britvic fizzes on out-of-home boost

“Oil prices continued to be under the spotlight as a US-led release of oil from strategic reserves failed to dampen commodity price inflation. Brent Crude advanced 0.5% to $82.70, extending a 3.3% rise yesterday,” says Russ Mould, Investment Director at AJ Bell.

“Strategic reserves are meant to be untouched unless there is a real shortage of oil, and there is certainly no emergency at present. Governments shouldn’t be dipping into them to try and control the market price. Also, the amount released is very small in the bigger scheme of things.

“The move might suggest that governments are prepared to release more reserves, which could send a message to the oil market that extra supplies could be available at the click of a finger which could cap any large increases in the oil price temporarily.

“However, any oil taken from strategic reserves will have to be replaced at some point soon, and potentially at a higher price, so it’s not as if governments can sit back and relax.

“For now, the actions were enough to give support to shares in Royal Dutch Shell and BP, which in turn helped to lift the FTSE 100 by 0.5% to 7,302. Miners and construction companies were also in vogue. That put the FTSE 100 at a one-week high.

“Elsewhere on the UK market, Johnson Matthey suffered a £314 million impairment charge linked to its decision to exit the electric vehicle battery space. However, it did recognise a gain of £44 million relating to damages and interest from a company found to have unlawfully copied one of Johnson Matthey’s technology designs. That’s a welcome reward, but it doesn’t make up for the fact that Johnson Matthey is now under considerable pressure to make hydrogen its new growth engine, now that the battery technology business is being wound down or sold.

“Animal genetics group Genus suffered another setback, triggering a 10% slump in its share price. A drop in Chinese pig prices has hurt animal producers in the country and left them unprofitable, which in turn has dampened demand for Genus’ porcine genetics.”

Britvic

“Soft drinks maker Britvic has regained some fizz as at-home sales remain resilient and, like other beverages plays, it has seen a boost as out-of-home sales return.

“Both its own range of brands, and those like Pepsi and 7UP which it manages on behalf of American giant PepsiCo, have been in demand as people buy cans and bottles to consume on the go or reach for non-alcoholic options when dining out or socialising at pubs and bars.

“The company struck a confident tone on managing the cost pressures and supply chain issues which are afflicting businesses across the globe and it was notable to see a significant hike in the dividend, albeit from last year’s depressed level.

“Britvic is getting round these challenges by being smart around pricing, keeping a lid on costs and having an efficient supply chain.

“Investors are likely to find it refreshing if it can deliver further progress on revenue, profit and margins in 2022 as promised.

“The company is also looking to a future in which plant-based drinks might become more popular as people look to avoid not just meat and dairy but also oils and processed ingredients. The recently acquired Plenish business is set for a big brand relaunch next year.”

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