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London open: Stocks fall as oil prices plunge after Doha talks collapse
UK stocks fell on Monday as oil prices plunged after global producers failed to agree on an output freeze to address the supply glut.
Members and non-members of the Organization of the Petroleum Exporting Countries held talks in Doha on Sunday but were unable to come to an agreement to curb oil production which could have helped to strengthen prices.
The talks fell apart after Saudi Arabia reiterated that it would not cap output unless Iran agreed to do the same. Iran, which did not attend the negotiations, has been reluctant to come to such an agreement since it’s recently been relieved of sanctions.
Brent crude dropped 4.6% to $41.17 per barrel and West Texas Intermediate declined 4.9% to $38.45 per barrel at 0851 BST.
“Our bigger picture view on the oil topic is that the expectation of a supply-driven rise in oil prices should not have been seen as a positive for demand/ risk appetite (apart from oil producers it should in fact hinder future output),” according to Rabobank.
On Monday’s agenda there will be little in the way of economic data. Instead, the attention turns to Chancellor George Osborne’s speech on Britain’s 23 June referendum on its European Union membership.
The Chancellor will publish a Treasury report which is expected to warn that a vote to leave the EU will lead to a possible recession.
In company news, airline stocks soared on the drop in oil prices including easyJet, TUI and International Consolidated Airlines.
Centrica slumped after saying it expected to axe 3,000 jobs in 2016 as part of its cost cutting plans with 800 gone in the first quarter of the year.
Interserve gained after being awarded a five year, £230m contract with the Ministry of Defence’s Defence Infrastructure Organisation to provide facilities services to the United States Air Force’s UK estate.
