Oils drag FTSE as Venezuela strike shows cracks

www.forbes.com Reuters, 01.21.03, 10:24 AM ET

LONDON, Jan 21 (Reuters) - Weak oil stocks BP <BP.L> and Shell dragged Britain's FTSE index to a fresh three month low on Tuesday amid worries about fuel refining margins and concern the possible ending of the Venezuela strike could hurt prices.

News that oil tanker pilots had ended their strike in a key Venezuelan export area dented crude oil prices, as it threatened to increase the flow of crude oil, especially to America.

"BP and Shell are sliding on the back of that," said Martin Dobson, head dealer at NatWest Stockbrokers. BP, which caused concern about refining profitability earlier this month, lost 1.1 percent while Shell <SHEL.L> dipped 1.8 percent.

By 1511 GMT the FTSE 100 index <.FTSE> was down 29.5 points, or 0.8 percent, at 3,749.8.

The index failed to re-establish a base above the 3,800 level after briefly bouncing to 3,185 earlier and looked set to register a loss for the seventh consecutive session.

Early weakness on Wall Street after Monday's closure for Martin Luther King day further unsettled sentiment.

"There's not an awful lot to get really confident about, especially with the overhang of the Iraqi situation," said NatWest's Dobson. "No-one's prepared to take a long-term view."

But stronger telecoms firms BT <BT.L> and Vodafone <VOD.L> helped take up some slack after investment bank Merrill Lynch issued a positive note on the sector.

Shares in mobile phones group Vodafone climbed 0.6 percent after Merrill Lynch raised its rating on the company to "buy" from "neutral".

BT Group topped the blue-chip risers with a 2.2 percent gain after Merrill Lynch repeated its "buy" rating on the stock, saying it expected BT to benefit from cuts to its operating costs and capital expenditure.

Also on the upside, shares in plumbing merchants Wolseley <WOS.L> rose 1.7 percent, while building materials firm Hanson <HNS.L> gained 1.5 percent, buoyed by a surprise jump in U.S. housing starts in December. Both firms have exposure to U.S. markets.