LONDON (MarketWatch) — Oil stocks on Europe suffered Friday following a decision by the Organization of the Petroleum Exporting Countries not to cut its 30-million-barrel-a-day production target for oil.
The Stoxx Europe 600 oil and gas group was pushed 3.5% lower, and fell 9.5% for the week, after OPEC held to its production target, disappointing those investors who had been hoping for the cartel to reduce output, in an effort address the issue of oversupply and curb the related drop in global oil prices.
Investors also assessed the impact of weak energy prices on eurozone inflation, which fell 0.3% in November, according to data released Friday by Eurostat.
The decline in inflation “just reiterates how serious a problem low inflation levels have become to the European Union economy,” said Jameel Ahmad, chief market analyst at FXTM, in emailed comments. “Now that OPEC has decided against cutting oil production, this has led to even weaker commodity prices and it is anticipated that inflation levels might now decline even further in the short-term. This in itself is going to place further pressure on the ECB to move towards full-blown quantitative easing.”
U.S. crude-oil futures CLF5, -10.45% dropped to a more than four-year low, losing more than 6%, to trade just above $69 a barrel. January Brent crude LCOF5, -3.53%managed to turn slightly higher after Thursday’s session during which Brent futures hit their lowest since August 2010. Brent is the global oil benchmark.
Markets: The Stoxx Europe 600 index SXXP, -0.07% finished off session lows, ending down 0.1% at 347.25, but oil stocks remained the worst performers. Premier Oil PLC PMO, -13.43% shares were knocked down 13%, leading overall losses on the pan-European benchmark. Exploration firm Afren PLC AFR, -11.16% dropped 11%, Norwegian energy company Statoil ASA STL, -7.34% stumbled 9.3% and Norwegian oil services provider Seadrill Ltd. SDRL, -6.86% fell 8.8%.
Among oil majors, shares of Total SA FP, -2.28% fell 2%, Royal Dutch Shell PLCRDSB, -1.88% fell 1.9% and BP PLC BP., -1.41% ended 1.4% lower.
But travel-related shares were among the best price performers as oil futures fell, considered a benefit to the oil-price sensitive sector. Air France-KLM SA AF, +6.36% climbed 6.8%, Deutsche Lufthansa AG LHA, +4.47% rose 4.9% and TUI AGTUI1, +3.25% moved up 3.5%.
The Stoxx 600 rose 0.6% for the week. Its 3.1% rise for November was the strongest monthly gain since February.
Turning to country indexes, Germany’s DAX 30 DAX, +0.06% edged up 0.1% to 9,980.85. It finished the week higher by 2.6%, and the month higher by 7%. The monthly rise was the best since January 2012, according to FactSet data.
France’s CAC 40 index PX1, +0.18% on Friday rose 0.2% to 4,390.18, pushing up its monthly rise to 3.7%. The U.K.’s FTSE 100 index UKX, -0.01% slipped less than 1 point to 6,723.4. It closed November higher by 2.7%, its best monthly run since April.
Inflation: The weakness in energy prices showed up in the eurozone’s November inflation reading. The headline number fell to 0.3%, down from 0.4% in October. Stripping out the effects from energy, food, alcohol and tobacco, core inflation reading stayed at 0.7%.