FTSE as doubts grow over oil deal between Saudi Arabia and Russia – Daily Mail, Dailymail.co.uk

Share prices in London dropped this morning as doubts grew over an oil price deal between Saudi Arabia and Russia that Donald Trump said he had brokered.

The FTSE (index of Britain’s largest firms fell 1 per cent or points to 5, 413 shortly after opening, while UK insurers dropped after their EU counterparts were asked to suspend dividend payments.

By 34 am the FTSE was further down by 1. (per cent or) points at 5, 413 and the index is now on course for its fifth weekly decline in six.

With the coronavirus pandemic raising the risk of a prolonged global downturn, investors are now seeking safety in the US dollar and government bonds.

It comes as global cases surpassed one million with 52, 06 deaths as the pandemic further exploded in the US and the death toll climbed in Britain, Spain and Italy .

BP and Royal Dutch Shell shares fell slightly as oil prices reversed early losses, with US West Texas Intermediate crude having surged a record . 7 per cent yesterday.

Stronger oil prices yesterday had seen gains in the US on Wall Street markets as the Dow Jones Industrial Average went up 2.2 per cent or (points to) , 725. )

Insurers fell today after their European Union counterparts were asked to suspend dividend payments to weather the economic hit from the coronavirus pandemic.

Shares in Legal & General, Aviva and Prudential were down by up to 7 per cent after the EU regulator asked insurers t o temporarily suspend dividends and share buybacks.

CMC Markets analyst David Madden said: ‘The action from the European Central Bank and the Bank of England in relation to bank dividend should have been a warning for insurers. In this day and age, you want to make sure that you’re as liquid as possible. ‘

Defense company BAE Systems dropped 2.3 per cent on deferring a decision on whether to pay its dividend and said it had launched cost control measures after seeing significant disruption.

London’s bus operators First Group, Go-Ahead Group, National Express and Stagecoach Group gained between 2 and 5 per cent as they welcomed £ 407 million in aid from the Government to keep commuter services running for essential staff.

Mr Trump said yesterday he had spoken to Saudi Crown Prince Mohammed bin Salman, and expects Riyadh and Moscow to cut oil output by as much as (million to million barrels, as the two countries signalled willingness to make a deal.

He tweeted last night: ‘Just spoke to my friend MBS (the crown prince) of Saudi Arabia, who spoke with President Putin of Russia and I expect and hope that they will be cutting back approximately 10 million barrels, and maybe substantially more which, if it happens, will be great for the oil and gas industry! ‘

Saudi Arabia said it would call an emergency meeting of the Organization of the Petroleum Exporting Countries.

The amount cited by Mr Trump would represent an unprecedented cut equal to per cent to 21 per cent of global supply, in output per day terms, a common unit of measurement.

However, Mr Trump provided few details, an omission some analysts said was likely intentional.

Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said: ‘He is a business man and smart enough to know these things. A cut of 15 – 20 million barrel per day (bpd) would be simply impossible.

‘How could Riyadh and Moscow agree on such a big cut, just about a month after they had fought over a cut of 1.5 million? ‘

In early March, talks over production cuts between the two countries collapsed, leading them to start a price war that pushed oil prices to the lowest levels in nearly two decades .

Nor did Trump make any offer to reduce US production, which has become the world’s largest at the expense of Saudi and Russian output.

Royal Bank of Canada analysts said in a note: ‘Both Riyadh and Moscow will also be looking for participation from US producers, and this may prove now to be the biggest obstacle to an agreement.’

Any cut is unwanted y to make up for near-term oil demand destruction, estimated to range between (million and) million bpd.