Oil, banks and meters

The FTSE 100 started the week in negative territory as crude prices fell overnight after oil producing nations failed to reach an agreement over freezing production levels. 

“BP and Shell were early and inevitable casualties as investors reacted to the fall in oil prices following the failure by oil exporting countries to reach an agreement on output,” says AJ Bell Investment Director Russ Mould.

“The fall in oil prices is sparking profit-taking as a marked slide in crude raises the question of whether BP and Shell will be able to maintain their dividend payments if oil remains lower for longer.

“The other sector which could suffer in the event of fresh oil price weakness is the Banks – already the worst-performing area of the UK market in 2016. Fresh declines in crude may stoke renewed fears of fresh loan defaults by some oil producers and prompt fresh analysis of the banks’ energy loan books. Barclays, HSBC and Lloyds were all down in early trading.

“Gas metering services provider Energy Assets’ shares jumped following a recommended offer by Euston BidCo, which is owned by investment funds controlled and managed by Alinda. The 685p per share offer values Energy Assets at £198m and is a premium of 40.4% to Friday’s closing price.”

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