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Shell outpaces BP as energy rebounds

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By Bryce Elder

Published: October 18 2008 03:00 | Last updated: October 18 2008 03:00

Energy stocks led the rebound yesterday as the FTSE 100 pushed higher for the first day in three. Bargain hunters moved into the sector as oil rallied from a 14-month low, helped by hopes that Opec would cut production next week.

Royal Dutch Shell led the way, outpacing BP after Goldman Sachs recommended switching into the former from the latter. While BP requires major investment or an acquisition to grow over the next decade, Shell’s project pipeline should drive cashflow generation, Goldman said.

The broker argued that Shell’s greater exposure to marketing would provide an edge while oil prices fall. Shell’s B shares rose 9.3 per cent to £13.50 while BP was up 8.6 per cent to 431¾p.

Mining stocks also recovered, with the sector index bouncing off a three-year low.Rio Tinto added 9.8 per cent to £22.50 after Chinalco, the Chinese state-owned metal company, admitted its 9 per cent stake was trapped in a Lehman Brothers’ custodial account.

Dealers said the news looked severely to weaken Chinalco’s chances of blocking the bid for Rio from BHP Billiton , up 10.4 per cent to 895½p.

Copper miner Antofagasta took on 3.4 per cent to 297½p in spite of Evolution Securities, a broker, repeating “sell” advice. It argued that the market was underestimating how much its expansion plans would drain cash reserves.

The FTSE 100 rose 5.2 per cent, adding 201.62 points at 4,063.01. For the week the index was up 3.3 per cent. The FTSE 250 fell 31.32 points yesterday to 6,311.39, down 6.9 per cent on the week.

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