Oil price tumbles on global demand concerns

London’s blue-chip index was dragged slightly lower by the tumbling price of oil as investors fret that supply could outpace global demand.

The FTSE 100 index closed 7.46 points, or 0.1%, lower at 6,952.86 while a barrel of Brent crude was trading down 6.2% at 58.66 US dollars (£45.76).

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the UK stock market is heavily influenced by commodity prices because some of its big hitters are global oil and mining companies.

Oil giants BP and Royal Dutch Shell make up about 17% of the FTSE 100, so when the price of oil declines the index falls.

“A falling oil price partly reflects perceived weakness in the global economy, though it acts as a self-correcting mechanism, as it makes lots of economic activity cheaper, and therefore more attractive,” Mr Khalaf said.

“For instance, a lower oil price will relieve pressure on UK consumers by halting the rise in fuel and heating costs we have seen in recent months. It thereby acts as a dampener on inflation and a boost to discretionary spending.”

France’s Cac was up 0.2% while Germany’s Dax rose 0.5%.

Meanwhile, the pound was weaker due to a stronger dollar and ongoing uncertainty surrounding the UK’s departure form the European Union.

Prime Minister Theresa May has reached a Brexit deal with the EU but is struggling to convince sceptical MPs to back it.

The pound was down 0.6% against the US dollar to 1.280 US dollars but was up 0.1% versus the euro at 1.129.

James Klempster, from Momentum Global Investment Management, said it seems likely that the leaders of the 27 EU countries will agree Mrs May’s deal, but the risk lies when it is put to Parliament “as it is difficult to see any MPs other than ardent Mayphiles viewing it positively”.

“Nevertheless, MPs may prefer the apparent certainty offered by the tabled Brexit deal over other options such as a no deal Brexit which would be very risky indeed,” he added.

In corporate news, shares in Flybe surged 6.89p, or 71%, to 16.55p, following confirmation that Virgin Atlantic is in talks about a takeover bid for the struggling airline.

Virgin, part-owned by Sir Richard Branson, is vying with Stobart to buy Flybe and is interested in its take-off and landing slots at London’s Heathrow Airport.

Shares in Interserve fell 1.96p, or 5.6%, to 33.04p after the struggling outsourcer said that its debt pile will be higher than previously forecast.

The company said that year-end net debt is expected to be in the range of £625 million to £650 million, up from earlier guidance of between £575 million to £600 million.

The biggest risers on the FTSE 100 were Ocado up 44.40p, or 5.9%, to 794.4p, easyJet up 47p, or 4.1%, to 1,207p, Royal Mail up 12.50p, or 3.8%, to 340p, and British Land up 17.40p, or 3%, to 606p.

The biggest fallers on the FTSE 100 were Fresnillo down 56p, or 7%, to 746.4p, Wood Group down 37p, or 5.9%, to 587.6p, Anglo American down 74.40p, or 4.5%, to 1,568.8p, and Evraz down 19.70p, or 4%, to 471.7p.