OIL AND gas led the FTSE down yesterday, while disappointing domestic economic data pointed to a weak manufacturing outlook.
Energy stocks shaved more than 10 points off the blue-chip FTSE 100 index, with crude oil prices weak on expectations that the Organisation of Petroleum Exporting Countries’ (Opec) production would remain high, pointing to the potential for oversupply despite declining US rig operations.
“Opec is unlikely to cut production in our view. Lack of cohesion among members and the emergence of US shale production weakened its monopoly position,” Lombard Odier said in a note. “We think prices cannot move sustainably higher given the state of underlying fundamentals.”
The engineering firm Weir Group, which does much of its business in the oil sector, fell 3.4 per cent, the index’ biggest faller.
Data after the market closed on Friday showed oil firms had cut 13 rigs from oil fields, the biggest drop in four weeks.
An improvement in US rig data has supported Weir in recent weeks.
At the close, the FTSE 100 index was down 30.85 points, or 0.4 per cent, at 6,953.58, having turned negative after the closely watched PMI manufacturing survey missed expectations, even as activity in the UK edged up from a seven-year low.
While there was strong domestic demand, the survey found that it was largely offset by weak exports.
Among gainers, Ashtead rose 2.8 per cent, the top FTSE 100 riser, after positive broker comment from Jefferies, recovering from a drop last week.
Lloyds rose one per cent after Britain said it would launch a sale of shares in the bank to private retail investors in the next 12 months and extended a facility enabling it to sell more shares to financial institutions.
Some traders maintained a cautious stance towards the FTSE given uncertainty over Greece’s debt problems, though most investors expect Greece to remain within the Eurozone.
Athens and its Eurozone and International Monetary Fund creditors have been locked in talks for months on a cash-for-reforms agreement. Officials denied rumours that a deal would be announced yesterday afternoon.
“I think it’d be a case of markets being risk-off until we reach a resolution on Greece,” Mike McCudden, head of derivatives at Interactive Investor, said.