The UK’s leading share index is facing its worst day since the 2008 financial crisis after billions were wiped off the value of top shares. The dramatic drop follows global falls as a row between Russia and Saudi saw oil prices plunge by more than a fifth. Shares were already reeling from fears of the impact of the coronavirus as cases globally continue to rise. The day has already been dubbed “Black Monday” by analysts who described the market reaction as “utter carnage”.
Oil prices are down more than 20% with Brent crude trading at $35.98 a barrel. “It shows a level of nervousness in the market which I haven’t seen in a long time,” said Justin Urquhart-Stewart, co-founder of Seven Investment Management. Investors are selling stocks at such a rate because they cannot quantify what Saudi Arabia and Russia might do, he said. Oil firms saw the biggest falls, with shares in Shell and BP both down by about 15%, while Premier Oil saw its shares more than halve in value.
The hefty falls were also seen elsewhere in Europe, with stock markets in France and Germany also opening more than 7% lower. Norway – a major oil exporter – saw its main stock exchange fall 12% in early trade.
The price of oil had already fallen sharply this year as the coronavirus disease began to spread internationally, with demand for fuel expected to decline. Last week, oil exporters’ group Opec – which includes Saudi Arabia – agreed to cut production in order to support prices. However, it also wanted non-Opec oil producers such as Russia to agree to cuts, and on Friday Russia rejected the plans. In response, Saudi Arabia has cut its official selling prices for oil and plans to increase production. The move is seen as Saudi Arabia flexing its muscles in the oil market to make Russia fall into line.
Source: (BBC Website, March 2020).
