Market Report: Shell-BG merger gets City backing despite oil slump

Will they, won’t they?

We’re not talking about US interest rates for once, but the $47 billion (£30.46 billion) tie-up between oil giants Shell and BG.

The oil-price slump has had investors in a panic about whether a deal would be off the cards, but analysts at Liberum Capital are convinced the pair will wrap things up, which they think will be better news for shareholders of BG, down 12.2p at 982.6p, than Shell, 20p cheaper at 1593.5p.

Analyst Jean-Pierre Dmirdjian upgraded BG to buy, but stuck to his hold recommendation for Shell, whose executives have been bullish about the oil price.

That makes sense when you consider Liberum thinks Shell will only turn a profit post-merger at $70 a barrel, which is some $20-odd higher than the current price.

To seal a deal, Shell needs to win over regulators in China and Australia, as well as the shareholders of both groups.

Meanwhile, Dmirdjian said investors are too worried about a cut to BP’s dividend and boosted its rating to buy on the day the company appealed against the US ruling that it rigged gas markets in Texas in 2008.

However, more woes for the oil price hurt the sector and BP’s shares fell 2.5p to 329.5p.

Traders again played the “wait and see” card, holding fire ahead of Thursday’s crucial decision on US interest rates, dragging the FTSE 100 down 51.94 to 6032.65.

Tumbling thermal coal prices took their toll on shares in the world’s largest exporter, Glencore, which crashed 7.55p to a new, all-time low of 120.35p.