The Organization of Petroleum Exporting Countries decided on Thursday not to scale back their production target of 30m barrels per day despite calls to reduce output amid a supply glut.

Shares of oil producers and energy services companies were extending losses made on Thursday with crude prices set to register their steepest weekly decline since 2011.

The FTSE 100 was down 0.7 per cent at 6,674 early on.

Brent crude was down 0.7 per cent at $72.08 a barrel on Friday morning, trading 10% below levels seen last week. Brent has now fallen by 35 per cent this year and analysts are warning that prices could drop as low as $60 per barrel.

Meanwhile, West Texas Intermediate oil was extending losses after falling below $70 a barrel on Thursday, its first time below this mark since mid-2010.

While oil producers will be directly bearing the brunt of the recent slump in prices, it is also likely to raise the pressure on central banks across the globe currently battling against deflation, such as those in Japan and Europe.

“While falling oil prices are a boon for the hard pressed consumer who has seen their incomes squeezed in the last five years, they are anything but for central bankers who worry about the effects a continued slide will have on their cherished inflation targets,” said analyst Michael Hewson from CMC Markets UK.

Overnight, it was revealed that Japanese inflation eased further in October, raising the pressure on prime minister Shinzo Abe ahead of the snap elections next month. Inflation slowed to 2.9 per cent, but was just 0.9 per cent when adjusting for the sales-tax hike earlier this year. This was further away from the government’s 2 per centtarget and the first sub-1 per cent inflation reading in 14 months.

Energy stocks sink

Oil producers were feeling the impact of the drop in prices with shares in BG Group, Tullow Oil, Shell, BP and BHP Billiton falling sharply on the FTSE 100.

However, FTSE 250 peers Premier Oil, Ophir Energy, Enquest and Afren were registering greater losses amid concerns that smaller firms may not have the scale to mitigate the impact of depressed crude prices for too long.

Meanwhile, energy services stocks were also under pressure, such as Petrofac, Weir Group, Hunting, Wood Group and Amec Foster Wheeler, on the back of fears that developers may scale back their spending budgets.

In contrast, the drop in crude was benefitting shares in the travel sectors on hopes that lower fuel costs will feed into higher profits. Easyjet, IAG, TUI Travel and Carnival were all on the rise.

Mining giant Rio Tinto was making gains after promising shareholders “sustainable cash returns” in 2015. The company also lifted its coal reserves estimates significantly in the Hunter Valley of Australia.

Market Movers
techMARK 2,930.87 -0.19%
FTSE 100 6,673.79 -0.74%
FTSE 250 15,797.91 -0.58%

FTSE 100 – Risers
easyJet (EZJ) 1,681.00p +2.94%
St James’s Place (STJ) 781.00p +1.43%
Kingfisher (KGF) 305.70p +1.33%
Compass Group (CPG) 1,078.00p +1.32%
Associated British Foods (ABF) 3,208.00p +1.26%
Vodafone Group (VOD) 230.10p +1.21%
International Consolidated Airlines Group SA (CDI) (IAG) 462.90p +1.11%
Marks & Spencer Group (MKS) 486.80p +1.00%
Whitbread (WTB) 4,566.00p +1.00%
Carnival (CCL) 2,724.00p +1.00%

FTSE 100 – Fallers
BG Group (BG.) 920.00p -6.76%
Weir Group (WEIR) 1,837.00p -6.28%
Tullow Oil (TLW) 441.30p -5.08%
Royal Dutch Shell ‘B’ (RDSB) 2,175.50p -3.97%
Royal Dutch Shell ‘A’ (RDSA) 2,095.00p -3.85%
BP (BP.) 410.70p -3.64%
BHP Billiton (BLT) 1,513.00p -3.45%
Petrofac Ltd. (PFC) 820.00p -2.79%
Smiths Group (SMIN) 1,150.00p -2.71%
Sainsbury (J) (SBRY) 228.50p -2.31%

Source: ShareCast