By Malcolm Stacey | Saturday 6 May 2017
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello Share Grinders. Unusually for me, I’m a little pessimistic this weekend. And the cause - a very weak oil price. This is a big disappointment, as the signs a few months ago were that the price of the ebony nectar was on the rise.
Opec had said it would reduce output to help mop up a world surplus. But some analysts are now worried that its members may not cut enough production soon enough.
Meanwhile, world output, fuelled by fracking operations in the USA, continues to rise. The current price of Brent Crude is below $50 a barrel. It was teetering around $60 not so long ago. And we all remember those even further distant days when the price of a barrel was around $120.
It’s obvious that share prices for the likes of Shell (RDSA) and BP (BP.) are going to be put under pressure. Though all oil companies are working hard to recede production costs. And, as I said a few days ago, BP remains a reasonable punt, as its juicy dividend seems pretty stable. As does Shell’s.
But it’s not just oil producers which suffer when the oil price drops. Most company share prices will be affected. Which is odd as manufacturers, just to take one example, should benefit from lower fuel prices.
Nevertheless, the fact remains that if the oil price falls, so will the Footsie. The trick therefore might to be to put a bit more dosh into firms which have nothing to do with oil. The techies, mayhap. Also, banks are among those sectors which have risen lately as the Brent value falls.
I still maintain my stance that share prices will continue to rise, possibly to the end of the year. But my confidence has been tempered by the falling oil price and I will be a bit more concentrated in my hovering over the sell button. At least for less defensive stocks. While gold mining is just one sector which seems to becoming more attractive.
And now it’s time to forget my worries at the Punter’s Return. God bless.
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