Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

StockBeat: Saudi Attacks Mean Oil & Gas Gains, Airlines Pain

Published 16/09/2019, 10:08
Updated 16/09/2019, 10:18
© Reuters.

© Reuters.

By Geoffrey Smith

Investing.com -- Oil and gas stocks surged and airlines and other cyclicals suffered Monday as the world was forced to rip up its oil price forecasts in the wake of the attack on Saudi Arabia’s oil facilities at the weekend.

By 5 AM ET, BP (LON:BP) and Royal Dutch Shell (LON:RDSa) had shot to the top of the U.K. FTSE 100, rising 3.8% and 2.8% respectively, while there were more spectacular gains for pure upstream plays such as Tullow Oil (LON:TLW) and Lundin Petroleum, which rose 8.9% and 6.7%.

Europe’s other majors, Equinor (OL:EQNR), Total (PA:TOTF), ENI (MI:ENI) and Repsol (MC:REP), all rose between 4.3% and 1.5%.

Another big gainer was Norway’s Seadrill (OL:SDRL), which had appeared to be skidding toward a second insolvency process as oil prices wilted in August. It rose 7.0% by 4:30 AM ET and is now up 60% from its low at the start of September.

Oil and gas contractors fared less well, reflecting the fact that while a windfall is guaranteed to anyone producing oil right now, it’s still not clear whether the sudden rise will last long enough to incentivize more investment in alternative supply. Analysts at Rystad Energy predicted last week that the oilfield services sector was headed for a recession next year, after three years of expansion (although chief sectoral analyst Audun Martinsen still sees the sector returning to growth from 2021).

By 5 AM, Technip (PA:FTI) was up 3.7%, while Saipem (MI:SPMI) was up 2.0% and Petrofac (LON:PFC) was up 2.1%

As far as initial reactions are concerned, airlines provided the mirror image to the oil sector’s gains. The sector has been struggling with overcapacity and weaker demand in any case, and is not well-positioned to withstand a lasting oil price shock.

Air France KLM (PA:AIRFxb) was the biggest faller, losing 4.0%, while discount flyer Wizz Air (LON:WIZZ) fell 2.8% and Lufthansa (DE:LHAG) fell 2.6%. Norwegian Air Shuttle ASA (OL:NWC) was the outlier, rising 6.4% amid progress on restructuring two of its biggest bonds.

Overall, markets took the news from the Middle East badly, and sentiment was hurt further by weak economic data out of China, where retail sales and fixed asset investment growth fell short of expectations and industrial production grew at the slowest pace since 2002, according to data compiled by Investing.com

The benchmark Stoxx 600 was down 0.6%, while the German DAX fell by 0.7% and the Italian FTSE MIB by 1.2%. Outperformers included the FTSE 100, which lost only 0.1%, and, of course, the Russian RTS, which rose 1.3% on the prospect of the oil windfall.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.