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13 November
The topic on everybody’s mind this week must be rock bottom oil prices and an even more rock bottom outlook seen to be dragging the oil companies down and weighing on the UK Index to boot. Enormous oversupply, spurred by OPEC’s war with the US and Russia for crude market dominance has produced a record breaking glut of 3 billion barrels, stretching US onshore storage to its limits, and has in turn caused the price of oil to plummet.
So what do we, the investor and consumer, have to worry about? Not much it would appear. With cheap fuel to power machinery and transportation, UK 100 companies who rely heavily on fuel can now reallocate this money into growth and expansion. Industries such as oil refinery, agriculture, transport, and manufacturing can all heavily benefit from a drop in fuel prices. And with oversupply not expected to draw down substantially any time soon, could we see more share price benefits for the likes of EasyJet (EZJ), Int. Consolidated Airlines (IAG), Carnival (CCL), and similar UK listed companies as they put their fuel money into marketing and other ventures, reassured that prices won’t be going anywhere any time soon?
Cars are cheaper to run in a world where we’re swimming in crude, leaving the consumer with more cash to splash on Christmas too. Low energy prices, backed up by the pretty much self-fulfilling Santa Rally could easily offset the cancellation of the UK’s Black Friday to help markets climb towards the end of the year – UK retailers could really benefit here with several currently trading at a large discount. Certainly, given this week’s equity market sell-off, now may be an even better opportunity to get involved.
Augustin Eden
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