The FTSE 100 stormed to a fresh record high yesterday as energy giants and miners were buoyed by a jump in the price of oil and other commodities.
Oil majors BP and Royal Dutch Shell, which comprise over 13 per cent of the FTSE 100, both climbed yesterday as crude jumped nearly three per cent, with North Sea benchmark Brent topping $52 a barrel.
The global price of the black gold rebounded after energy ministers from the world’s top two producers said they wanted to extend a cut in production.
The Organisation of the Petroleum Exporting Countries (Opec) and non-Opec nations agreed last year to reduce output by around 1.8m barrels per day for the first six months of 2017 to curb a global supply glut.
Opec's efforts have been undercut by the shale boom in the US. Nonetheless, the oil price was boosted yesterday when Saudi Arabian and Russian oil ministers said supply cuts should be extended for nine months until March 2018.
Opec meets next Thursday, 25 May, to decide how to proceed.
London's blue chip index closed at 7,454.37 points, after ending last week at 7,435.39 points. The index briefly rose to a peak of 7,460.20 points in morning trading.
Higher commodity prices drove early gains, with miners also reaping the benefits.
Anglo American led the FTSE 100 as shares closed 3.22 per cent higher. Silver spot prices and copper prices both rose more than one per cent.
“The market is still positioned for higher oil prices but the risk is that Opec has already lost the trust of investors while US inventories keep rising. An output extension has been widely expected so oil markets remain at risk of another crisis in confidence,” said Jasper Lawler, market analyst at London Capital Group.
However, Fawad Razaqzada at Forex.com was more bullish: “What might happen in the next 10 days or so is that oil prices may continue to drift generally higher, the dips may be bought and then a sharp reaction higher when the expected news comes out on 25 May."
The FTSE 100's new all-time high signals investors are showing confidence that uncertainty surrounding Brexit can be successfully navigated, said Dennis de Jong, MD at UFX.com.
“The global outlook has been strengthening in recent weeks, and with the markets already pricing in a Tory landslide in next month’s election, Theresa May will no doubt continue to paint herself as the choice for stability,” De Jong added.