Opec’s first cut in eight years pushes FTSE near year highs

LONDON’S blue-chip index pushed close to its highs for the year today as the prospect of oil cartel Opec’s first production cut in eight years sent the City rushing to bet on black gold.

Divisions between Saudi Arabia and Iran — which is now free of sanctions and keen to keep pumping oil — had been seen as too wide to bridge at this week’s meeting in Algiers.

However, an initial agreement which caught the market off-guard should see output cut to between 32.5 million and 33 million barrels per day from current levels of 33.2 million barrels per day.

Goldman Sachs analysts said the cuts could add as much as $10 a barrel to the oil price.

Although the final agreement has to be made at Opec’s next meeting in Vienna in November, the proposed cut was enough to send Brent crude up more than 5% to above $48 a barrel overnight.

Heavyweights Royal Dutch Shell and BP led the way, up 103p or 5.4% to 1998.5p and 19.45p or 4.5% to 451.7p respectively, helping push the FTSE 100 index more than 1% to 6,922.73, within 20 points of its highest close of the year.

Meanwhile, other stocks that benefited from the Opec dividend included Tullow Oil which rose 7%, as well as oil and gas engineers Amec Foster Wheeler, Wood Group and Weir, which all enjoyed gains of up to 8%.

Opec is due to meet in Vienna at the end of November this year.