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Shell Leads Oil Stocks to 5-Year Low on Economy Fears (Update2)

Bloomberg 

 

By Fred Pals

Oct. 10 (Bloomberg) — The Dow Jones Europe Stoxx Oil & Gas Indexdropped to its lowest in almost five years, led by Europe’s three biggest oil companies, as crude prices slumped on concern the global economy will fall into a recession.

The 40-company index fell 8 percent to 245.90, the lowest since November 2003. Royal Dutch Shell Plc, Europe’s largest oil producer, lost 9.3 percent to close at 1,303 pence, a record low. BP Plc, the second-largest, declined 8.1 percent to 376.25 pence, the lowest since March 2003. Total SA, the third-biggest, slid 2.8 percent to 33.18 euros, also the lowest since 2003.

Global stocks have tumbled, driving the MSCI World Index to its worst week in more than three decades, on concern the deepening credit crisis will spur the failure of more financial companies and send economies into a recession. Oil fell below $80 a barrel earlier today for the first time in a year and traded at $80.56, down 7 percent, at 5:19 p.m. U.K. time.

“Price fluctuations in the commodities markets aren’t related to fundamentals but are simply the result of pricing stemming from the broader financial crisis,”Frederic Lasserre, head of commodities research at Societe Generale, said today in an interview in Paris. “Oil prices are completely dominated by the financial crisis. There are fears about the consequences of the economic crisis next year.”

Hurt Earnings

Oil stocks are down on concern a recession may hurt earnings rather than because of a fundamental weakness in larger integrated oil companies, Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said by telephone today. “The large-cap oil majors still have pretty resilient financials.”

The International Energy Agency, an adviser to 28 nations, cut its forecast for global oil consumption next year by 0.5 percent as financial-market turmoil threatens demand.

The IEA lowered its 2009 projection by 440,000 barrels a day to 87.2 million barrels a day, the Paris-based agency said today in its monthly report, citing a weaker economic outlook from the International Monetary Fund. Non-OPEC supply growth this year has been “largely wiped out” after hurricanes in the Gulf of Mexico and pipeline disruptions in Azerbaijan, it said.

Fugro NV, the world’s largest surveyor of deepwater oil fields, and France’sTechnip SA paced declines among oil-services companies, falling 13 percent and 7.4 percent, respectively. Italy’s Saipem SpA dropped 5.2 percent.

Worst Performers

The worst performer in the Stoxx 600 group this year is Sevan Marine ASA, the Norwegian builder of offshore oil- production units, which has lost 85 percent. Renewable Energy Corp., the largest producer of polysilicon for solar panels, fell 73 percent while Petroleum Geo-Services ASA, the world’s third- biggest provider of oilfield-mapping services, sank 70 percent.

E.ON AG, Germany’s largest utility, led declines among European power producers in the Dow Jones Europe STOXX Utilities Index, retreating 10 percent to 25.32 euros. GDF Suez SA, the owner of Belgium’s biggest power producer Electrabel SA, fell 7.5 percent to 24.30 euros.

To contact the reporter on this story: Fred Pals in Amsterdam at[email protected]

Last Updated: October 10, 2008 12:58 EDT

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