FTSE 100-listed energy stocks have crumbled in early trading after Saudi Arabia initiated a price war that saw oil prices collapse today.
Shell’s share price plummeted 21 per cent before trimming losses to stand down 14.8 per cent by 9.50am, while BP’s tumbled 17.3 per cent to 326.9p.
Petrofac fell over 50 per cent to as low as 190.6p before recovering to stand 16 per cent down.
Other FTSE 100 and FTSE 250 energy stocks also saw falls:
- Anglo American dropped nine per cent to 1,534.6p
- Wood Group slumped 15 per cent to 272.8p
- Rotork fell 15 per cent to 241.5p
- Glencore dropped 8.7 per cent to 159p
- United Oil and Gas plunged 24.5 per cent to just 1.9p
Oil prices hit a four-year low today after Russia and Saudi Arabia’s three-year alliance fell apart in dramatic fashion over the weekend.
Russia, which had been in alliance with Opec as part of Opec+, had wanted to restrict oil prices due to the coronavirus crisis hurting demand.
But botched talks saw the allies disagree and Saudi Arabia yesterday responded by flooding the world’s markets with oil in a bid to win new customers.
Saudi Arabia is reportedly planning to produce almost 11m barrels a day in April.
Brent crude opened on $31 a barrel as a result, a plunge of 30 per cent and the lowest figure since February 2019.
Although the value later recovered to $36 a barrel, it was the biggest daily fall in oil prices since the 1991 Gulf War.
“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the signiﬁcant collapse in oil demand due to the coronavirus,” Goldman Sachs told Reuters.
The tumbling oil prices dealt a major blow to the world economy today, as well as energy stocks. It sent European stocks falling at their sharpest rate since the collapse of the Lehman brothers.
And the FTSE 100 opened with an 8.5 per cent drop, before trimming losses to stand 6.6 per cent down. The initial loss was the London index’s fastest fall since the fallout of the Brexit referendum.
Traders quit the volatile stock markets to flee to safe havens such as bond yields. And the 10-year US Treasury bond yield is now paying out a record low.
And the S&P 500 Futures actually halted trading in an attempt to let stocks recover after investors sent the stock market down five per cent hours before the US opens.