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London open: Stocks gain as oil prices rebound
UK stocks rose on Tuesday as oil prices recovered from lows in the previous session after a disappointing meeting between global producers in Doha.
Oil prices were under pressure throughout most of Monday’s session as investors continued to digest Sunday’s meeting between members and non-members of the Organization of the Petroleum Exporting Countries.
The producers failed to come to an agreement to freeze oil production as the market had hoped, 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 has recently been relieved of sanctions.
In a lift to oil prices, Kuwait’s crude production dropped more than half on Sunday as thousands of its oil industry employees began an open-ended strike over government plans to cut wages. The nation’s output was 1.1 million barrels a day, down from the usual 3 million it produces.
At 0853 BST Brent crude rebounded 1.7% to $43.66 per barrel and West Texas Intermediate increased 1.5% to $40.42 per barrel.
“Doha meeting? What Doha meeting? Yesterday’s knee jerk decline in oil prices to the disappointing outcome was very quickly reversed as the day wore on,” said Brenda Kelly, head of analysts at London Capital Group.
“The price of the commodity is also amassing some support from the Kuwait worker strike. Market participants are evidently hoping that this will lead to a smaller global supply glut as around 60% of the country’s production is severely curtailed.”
In economic data, there is little on the agenda with the only notable releases being ZEW’s survey on economic sentiment in Germany at 1000 BST and US housing starts at 1330 BST.
In company news, mining stocks were the biggest risers as metal prices rose. BHP Billiton, Anglo American, Fresnillo and Glencore were in the black.
Rio Tinto was also higher after saying it produced some positive production growth in the first quarter of 2016, with its iron ore and aluminium operations particular standouts.
Associated British Foods gained after reporting first half earnings that were better than analysts’ had expected due to a long-awaited improvement in its sugar business.
Meggitt jumped after it reiterated its full-year revenue guidance as it said first-quarter trading has been in line with expectations.
Utilities were in the red with National Grid and Severn Trent among the fallers.
