FTSE up, oil prices lower on reports Biden wants to flood the market, and Trainline shares soar on commission rate relief

“It has felt a bit like the FTSE 100 was singlehandedly being kept afloat by the big oil stocks, BP and Shell, in recent weeks but Thursday’s modest move higher for the index shows it is more than a one-trick pony with both these heavyweights lower in early trading,” says AJ Bell Investment Director Russ Mould.

“BP and Shell fell thanks to a slump in oil prices in response to US President Joe Biden’s reported plan to flood the market with barrels from the country’s strategic petroleum reserve.

“However, it is noteworthy that despite Biden pledging the biggest release from the reserve since the 1970s, oil remains stubbornly above $100 per barrel.

“You can understand why the US leader felt he had to do something, given the political heat he is getting for rising fuel prices, however a speculated release of one million barrels of oil per day over the coming months has to be seen in the context of total global output of around 100 million barrels per day.

“Really this is tinkering at the margins. What might put more of a brake on prices is action by OPEC at its meeting later but the extent to which it could increase production, even if it wanted to, is open to question.

“Another factor which could tip the scales is a global economic slowdown and more lockdowns in major energy consumer China.

“The other key focus remains the war in Ukraine with mounting scepticism over the destiny of the latest round of peace talks – the market may have to accept this will be a protracted conflict and adjust its assumptions accordingly.”

Trainline

“There will be a sigh of relief in Trainline’s camp regarding the proposed changes to its commission rates. The rail industry is undergoing a lot of changes, and this includes reviewing the cut that third party ticket sellers get when they put bums on seats.

“Trainline’s slice of the pie looks like it will go from 5% to 4.5% which in the grander scheme of things is not a bad deal. The rail sector has been through very difficult times during Covid, and it would have been easy to slash commission rates to the bone, leaving Trainline in a pickle.

“Fortunately, the business should be able to cope with a half a percentage point decrease in the rate. Even better for its finances is the removal of central industry costs worth 0.25%. That explains why its share price has shot up more than 20% on the news.

“So far so good, but it’s too early for Trainline to start celebrating properly. There is a bigger issue to overcome which is the rail industry’s new ticketing platform which poses a risk to Trainline’s market share.

“The best-case scenario would be for Trainline to be picked as the behind-the-scenes platform provider, effectively providing a white label version of its own website.

“It already provides such services for various train companies and so has proven expertise. But if these white label services move under the Great British Railways umbrella, it means Trainline will have to find a new seat at the table otherwise it could be left out in the cold.”

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