Brent Crude Hits Five-Year Low -- Update

By Josie Cox 

The price of oil hit a fresh five-year low early Tuesday, slamming energy stocks and the currencies of commodity-dependent economies.

In early trade, Brent crude, which has now fallen more than 40% since the start of the year, fell an additional 1.2% to $65.37 a barrel--a level last seen in August 2009. It later retraced somewhat, but equities and currencies remained firmly under pressure.

The Stoxx Europe 600 subindex of oil and gas companies was down by around 1.4% by midmorning, taking its year-to-date decline to almost 12%, and making it the day's worst performing subindex taken from the broader Stoxx Europe 600 index. Not a single name was trading in the green at the open. The biggest decliners included Seadrill Ltd., Premier Oil PLC and Fugro NV.

ING credit strategist Nadège Tillier said that for the majority of OPEC members, a price of $65 a barrel already means they are selling oil below the cost of production. "In the long run, a price below $85 per barrel means financing difficulties for most oil and gas companies," she said.

On Monday, U.S. oil giant ConocoPhillips had already said it would cut capital spending by 20% next year to $13.5 billion, a sign that it is treating the plunge as more than a temporary dip.

Jefferies economists meanwhile, published a note on Tuesday in which they lowered their average price forecast for Brent in 2015, 2016 and 2017 by 16% to $72, $83 and $90, respectively. They had already cut forecasts in October but said the latest fall is "more material" than expected.

In currency markets, Russia's ruble stumbled. The currency has depreciated by more than 40% against the U.S. dollar so far this year.

Nigeria's naira was around 2.1% lower against the buck, according to Thomson Reuters data, after the country's central bank on Monday sold an additional $200 million of reserves, in an attempt to strengthen its ailing currency, according to a memo written by the central bank.

One dollar currently buys more than 184 naira, almost 13% more than at the start of the year.

Beyond oil, the picture was equally bleak across Europe, where stocks fell deeper into the red, extending a day-earlier move inspired by weak data from Asia and Europe.

Having closed the previous session 0.7% lower, the Stoxx Europe 600 fell an additional 0.9%, mirroring similar falls on country indexes in Germany, France and the U.K.

The biggest faller on London's FTSE 100 index was beleaguered retailer Tesco PLC. Its shares fell by around 16% at the open after it lowered its full-year profit forecast, citing changes it has made in the wake of an accounting scandal and investment in its business amid fierce competition.

Elsewhere in Europe, Greek stocks and bonds tumbled Tuesday, after the government's decision to bring forward a high-stakes parliamentary vote for president.

The main stock index in Athens slipped over 8% making it the worst-performing index in the region. The yield on the country's 10-year government bond rose 0.38 percentage point to 7.55%, reflecting a fall in the price of the debt.

On Monday, a government spokeswoman said that the parliament would vote on a new president on Dec. 17--two months ahead of schedule--to replace head of state Karolos Papoulias, whose five-year term was slated to end in March.

The announcement came just hours after eurozone finance ministers decided to extend Greece's deadlocked bailout talks into early next year.

Deutsche Bank analyst George Saravelos said that both events set markets up for "a very elevated period of event risk into year-end."

Japan's Nikkei index closed lower on Tuesday too, snapping a seven-day winning streak, after figures Monday showed that the economy had contracted 1.9% in the third quarter. Also, in China, the Shanghai Composite Index tumbled 5.4%, the biggest daily percentage drop in more than five years.

In the U.S., the S&P 500 on Monday recorded its biggest one-day percentage drop since last October. On Tuesday it was indicated opening 0.3% lower. Futures, however, don't necessarily reflect moves after the opening bell.

Write to Josie Cox at [e-mail]

Access Investor Kit for Seadrill Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=BMG7945E1057

Access Investor Kit for Premier Oil Plc

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B43G0577

Access Investor Kit for Fugro NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=NL0000352565

Access Investor Kit for ConocoPhillips

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US20825C1045