By Chris Dorrell
London’s FTSE 100 was dragged up by its oil giants at the beginning of the week, as OPEC’s cut to production saw BP and Shell climb.
The capital’s premier index 0.72 per cent higher at 7,686.86 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, rose 0.12 per cent to 18,951.20 points.
The FTSE 100’s top climbers were BP and Shell, up 4.3 per cent and 4.0 per cent respectively.
The oil firms benefited after OPEC and its allies, known as OPEC+, announced voluntary cuts to their production yesterday, amounting to around 1.15m barrels per day.
This announcement comes on top of the 2m barrels per day cuts agreed last November, which will kick in from next month. The reduction in production saw the price of a barrel of Brent shoot up to its highest level since January.
Hargreaves Lansdown’s Sussanah Streeter commented: “After a relative tempering in the oil price, Brent crude has jumped to over $84 a barrel and the highest levels in a month.
“The upwards move comes after OPEC+ announced an unexpected cut to production of over one million barrels per day. A dispute involving Kurdish authorities last week has also reduced output elsewhere. The final piece of the puzzle comes courtesy of an expected increase in demand from China which puts further pressure on the price,” she continued.
Higher oil prices will put renewed pressure on inflation, which had been coming down in most Western countries, potentially forcing central banks to extend their monetary tightening campaigns.
Elsewhere banks were in the green as investors hope April will be kinder to the sector than March.
HSBC rose 1.9 per cent, Barclays 1.8 per cent, Lloyds 1.5 per cent, and NatWest 1.0 per cent.
The pound fell 0.1 per cent against the dollar, which was stronger this morning against most currencies. Analysts at ING said the OPEC production cut had thrown the greenback, which had been strugglined in recent weeks, a “temporary lifeline” as it will put pressure on the Fed to consider more rate hikes.
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