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The continued collapse in oil prices

Screen Shot 2015-01-17 at 23.40.49From an article by Joanne Hart published 18 Jan 2015 by the Financial Mail On Sunday:

“Deep trouble: Shell’s share price has fallen 17 per cent since July as falling oil prices have spooked markets”

Extracts

The market has been spooked on many fronts. Oil prices have more than halved in the past six months.

While this should be good for the economy, it has hit energy stocks hard. Commodities have also slid, sending metals and mining shares tumbling.

BP, Shell and BHP are three of the largest firms in the FTSE 100 and they have been badly burned by the rout in the oil and commodities markets.

BP, Shell and BHP are three of the largest firms in the FTSE 100 and they have been badly burned by the rout in the oil and commodities markets.

BHP has lost more than 30 per cent of its value since July, BP has fallen by more than 16 per cent and Shell has sunk by almost 13 per cent. Their decline has wiped more than £110 billion off their combined value since the summer and investors have suffered heavy losses.

All three have embarked on extensive self-help programmes. Only last week, BP announced 300 job cuts in Aberdeen to save costs, having announced last year that hundreds of back-office workers were now surplus to requirements here and in the US.

Shell, meanwhile, shelved plans to build a £4.2 billion petrochemical plant in Qatar with state-owned oil company Qatar Petroleum. Shell’s decision was attributed directly to the falling oil price and follows a multi-billion pound round of disposals last year by new chief executive Ben van Beurden.

FULL ARTICLE

From an article by Mehreen Khan published by The Sunday Telegraph on 18 Jan 2015 under the headline: 

“Tumbling oil will keep rates on hold until 2016, warns forecaster”

Extracts

A fall into outright deflation in the coming months will force the Bank of England to delay a rise in interest rates until 2016, one of the UK’s most influential economic forecasters has warned.

The continued collapse in oil prices will see inflation average just 0pc in 2015, giving way to a gradual tightening of policy only in the first three months of next year, the EY Item Club is expected to say on Monday.
Consumer prices are likely to turn negative in the middle of the year, pushed lower by the collapse in global commodity prices, according to the forecast.

The sliding cost of oil “should persuade the Monetary Policy Committee to err on the side of caution, and keep interest rates on hold until the first quarter of 2016”, the EY Item Club will say.

The think-tank will also revise up its forecast for GDP growth to 2.9pc from 2.4pc for 2015 as “low inflation will have a reflationary effect on the economy”.

FULL ARTICLE

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