Oil price drops, and BP and Shell shares slide, as Saudi Arabia ‘prepares to abandon $100 crude target’ – as it happened

Time to wrap up, here’s a quick recap:

The oil price has fallen to a two-week low, following reports that Saudi Arabia is preparing to return to higher oil output, even it that hits the price of crude.

Brent crude is trading around $71.38 per barrel.

Oil majors have also been hit by the move, with BT down 4% and Shell losing 4.6%.

The head of the European Central Bank, Christine Lagarde, has spoken about the threats and opportunities created by technology.

China is expected to launch a blizzard of new debt sales to fund a stimulus package to support economic growth.

UK consumer confidence has dropped, as fears over next month’s budget weigh on households.

The European Bank for Reconstruction and Development (EBRD) has cut its growth forecasts, and warned that Europe is struggling to cope with much higher energy prices than the US and a lack of investment.

Elon Musk has reportedly not been invited to the UK’s upcoming investment summit, following comments made during last month’s riots.

The Horizon IT scandal inquiry has heard that the Post Office is ‘rudderless’

Oil is continuing to slide, following today’s reports that Saudi Arabia is ready to abandon its unofficial price target of $100 a barrel for crude , and increase output instead.

Brent crude is now down over 3% at $71.22 per barrel – a two-week low.

The head of the European Central Bank, Christine Lagarde, has warned that technological advances pose risks, as well as opportunities, to the financial system.

Speaking in Frankfurt, Lagarde said advances in IT have changed financial systems radically.

She cited algorithmic trading, which has improves liquidity for large-cap stocks, and encryption technology, which allows online banking and electronic payments, but also crypto-assets and decentralised finance.

But (perhaps predictably), she says artificial intelligence may prove to be the most transformative for the financial system.

Lagarde cites the disruption caused by the CrowdStrike IT outage this summer as an example of the risks that come from relying on a small number of third-party providers.

Speaking at the eighth annual conference of the European Systemic Risk Board, Lagarde says:

These technology firms may have systemic importance and are a key element of the Digital Operational Resilience Act, an EU microprudential legislation.

This concentration risk is further heightened in an environment marked by geopolitical tensions and the rapid uptake of AI.

Hostile states could wreak havoc if they uncover just one critical weakness in our financial system. At the ESRB, we expected intensified cyberattacks following Russia’s invasion of Ukraine. Fortunately, the financial system has proven resilient so far, but the risk remains.

The widespread adoption of AI may also have systemic implications for the financial system. For example, if AI suppliers were to remain concentrated, operational risk, market concentration and too-big-to-fail externalities may arise. Moreover, an extensive uptake of AI could increase the potential for herding behaviour.

Lagarde adds that advances in quantum computing may pose a serious threat to our encryption-based financial system, warning:

The technology may even go on to eventually break current encryption methods, although it is difficult to know when this might happen.

The head of the National Federation of Subpostmasters has called the Post Office “rudderless” as he was questioned at a public inquiry about why he failed to show public support to Sir Alan Bates and 554 other postmasters after they sued the Post Office in a high court lawsuit.

Calum Greenhow, chief executive of the NFSP, a representative body for self-employed postmasters, has been testifying to a public inquiry which is examining why the Post Office wrongly prosecuted hundreds of postmasters for theft and false accounting after financial shortfalls in their branches. It has since emerged that the shortfalls were caused by bugs and errors in the Post Office’s Horizon IT system.

Greenhow was questioned by Catriona Hodge, counsel to the public inquiry, about why the NFSP, the representative body for self-employed postmasters, did not publicly support 555 postmasters led by Sir Alan Bates during their High Court litigation. The court case was the subject of the recent ITV drama Mr Bates v Post Office.

Greenhow, a former Post Office operative who took over as chief executive of the NFSP in June 2018, said:

“I did not think it was our place. We were not involved in the court case. I thought if we did we might prejudice it in some shape or form.”

He denied its stance was due to concerns that the NFSP was “fearful” it would lose its funding from the Post Office if it incited post office operators to bring the litigation.

Greenhow said he felt “sympathy” with the postmasters and had attended the high court trial on its first day where he had wanted to shake hands with Sir Alan outside the courtroom but did not get the opportunity.

He was shown minutes from a meeting of the NFSP board in June 2017 which stated that the Post Office “went ballistic” after an issue of the Subpostmaster magazine had carried an advert for Sir Alan Bates’ Justice for Subpostmasters and Freeths, the law firm representing the 555 post office operatives in the high court case.

“That mistake could have cost the NFSP the payments from PO and ultimately finished the organisation,” the document said. Greenhow said he was not “party to the discussions” as his predecessor George Thomson was in charge at the time.

He said:

“George was putting forward his view..that doesn’t mean to say it was the view of the board. I don’t know if the Post Office did go ballistic or if that was George’s interpretation of it.”

In his witness statement, Greenhow called the Post Office “rudderless” given the number of senior executives who have left the company including current chief executive Nick Read who is leaving next March.

Over on Wall Street, stocks have hit a fresh record high at the start of trading.

The S&P 500 share index is up 0.64% or 36.55 points, at 5,758.81 points.

The drop in the oil price today is lifting companies who are sensitive to economic growth, such as construction equipment maker Caterpillar and chemicals company Dow.

Traders will also have noted China’s latest stimulus push, announced overnight, which should also support global demand.

Private jets are one of the most expensive, and environmentally damaging, perks enjyed by top executives – and a backlash against them is building among investors.

Financial News is reporting today that Legal & General Investment Management, the UK’s largest fund management group, has adopted a hardline approach towards companies that provide their chief executives with private jets, voting against a string of pay packages where their use is included as a perk.

LGIM has “for a number of years” been piling pressure on the companies in which it is a major shareholder to remove corporate jets as a benefit.

This year it has taken action and opposed remuneration policies at several US companies where private jet travel is being offered to CEOs, including at hotel groups MGM, Hyatt Hotels, Hilton Worldwide and Marriott International.

LGIM said in a statement:

“Aviation is a high emitter of carbon emissions and at present, there is insufficient supply of alternative fuels to reduce these emissions.”

“Although we accept that there may be a legitimate reason for some of these companies to use corporate jets for business purposes, we do not support the use of corporate jets as a perk as it increases overall emissions.”

Starbucks’ new CEO, Brian Niccol, has faced criticism after the company offered to let him commute from his home in Newport Beach, California, to its headquarters in Seattle via a private jet instead of relocating.

The perk has irked other Starbucks shareholders.

As Eric Pedersen, head of responsible investments at Nordea Asset Management, which is a top 30 shareholder in Starbucks put it:

“It should go without saying that a situation where senior managers commute by private aircraft to be able to live up to their own hybrid work policies is not ideal.”

Just in: We have confirmation that the US economy grew faster than rival Western economies in the second quarter of this year.

New GDP data, just released, confirm that real US GDP increased at an annualised rate of 3.0 percent in the April-June quarter.

That’s the equivalent of quarterly growth of 0.75%, faster than the UK’s 0.6%, or the 0.2% recorded in the eurozone..

The US Bureau of Economic Analysis reports that the increase in GDP was due to higher consumer spending, private inventory investment, and nonresidential fixed investment.

The oil supermajors BP and Shell have had billions wiped from their market value today after the global oil price slumped amid signs that Saudi Arabia is preparing to return to higher oil output.

The world’s biggest oil producer is reportedly planning to abandon its strategy of withholding crude exports to help drive global oil market prices towards $100 a barrel in favour of producing more barrels at a lower price.

The major strategy shift, first reported in the Financial Times, caused the Brent crude oil price to slump by more than 2% on Thursday morning to below $72 a barrel and triggered a swift selloff of shares in Shell and BP.

The oil companies are the biggest fallers on the FTSE 100 index so far today, with Shell’s share price down 4.6% at 2,414p a share and BP tumbling by 4.8% to 381p.

The latest slump in the global oil price means the market is now almost 28% lower than the average price in 2022 when Russia’s invasion of Ukraine caused the market price to surge to $99 a barrel.

Saudi Arabia and its allies in the Organisation of Petroleum Exporting Countries (Opec) have attempted to keep oil prices as close to $100 a barrel as possible by reducing their production since November 2022. However, they have been unable to keep the market from tumbling due to jitters across the global economy.

Riyadh will reportedly now allow its state-owned oil company, Saudi Aramco, to pump more crude into the global market from this December in an apparent surrender to the reality of weaker oil markets.

Libya is also expected to resume crude exports after the country’s eastern and western regions agreed on the process of appointing a central bank governor to oversee the country’s oil revenues, effectively pouring more crude into an oversupplied market.

Oil prices have continued to fall in recent months despite the Opec production cuts, the ongoing conflict in Ukraine and the escalating conflict in the Middle East, mainly as a result of shaky economic data from China, which is the world’s largest oil importer.

There was a short-lived bounce in oil prices after Beijing set out its biggest fiscal stimulus package since the pandemic earlier this week but prices had retreated again before concerns emerged that Saudi Arabia could flood the market with extra barrels.

Ole Hvalbye, a commodities analyst at SEB, said Saudi Arabia is likely motivated by a desire to regain its share of the global oil market as rival producers including the US ramp up their output.

Hvalbye said:

“For months, the market has been sceptical about whether Saudi Arabia would follow through with the production increase, but the recent rhetoric indicates that they may act on their initial plan.”

The gold price has climbed to a new record high today.

Spot gold traded as high as $2,679.99 per ounce today, a new peak, meaning it has gained around 30% so far this year.

Silver is also rallying, hitting its highest since late 2012.

Precious metals prices have been pushed higher by the weakness of the US dollar, which has fallen as the US Federal Reserve cut interest rates sharply this month.

David Morrison, senior market analyst at Trade Nation, says September is turning out to be a good month for gold.

This is turning out to be a good month for gold. It began on the back-foot after traders returned from US Labor Day holiday and sent prices down to the lower end of a month-long trading range.

Since then, it has rallied 8%, and closing in on $2,700. Can it make it? Gold has come a long way without a significant pullback, and only a brief period of consolidation so far this month.

The UK has sanctioned five ships and two other shipping entities which are involved with transporting Russian liquified natural gas (LNG).

The Foreign Office says this is the first time the UK is using its new ship specification power to target LNG vessels directly.

It is attempting to squeeze Russia’s energy revenues, which are a critical source of funding for the war in Ukraine.

The sanctioned ships are called Asya Energy, Pioneer, North Sky, SCF La Perouse and Nova Energy, and the sanctioned entities are White Fox Ship Management and Ocean Speedstar Solutions OPC.

The Foreign Office says today’s sanctions build on previous curbs on the Arctic LNG 2 project on Russia’s northern coastline.

Russia has plans to expand its LNG revenues, aiming to grow their global LNG market share from 8% to 20%.

Earlier this year, the UK sanctioned Arctic LNG 2, alongside our allies in the US and EU. Since then, the project has been forced to slash production. Today’s action builds on this by targeting ships and entities involved in the Russian LNG sector, which engage with projects important to Russia’s future energy production.

China is reportedly planning a massive debt splurge to fund new stimulus measures to support its economy.

According to Reuters, the Beijing government are planning to issue special sovereign bonds worth about 2 trillion yuan (£213bn) this year as part of a fresh fiscal stimulus push.

Earlier today, Chinese leaders pledged to deploy “necessary fiscal spending” to meet this year’s economic growth target of roughly 5%.

An official readout of a monthly meeting of top Communist Party officials, the Politburo, also included guidance to the government to support household consumption and stabilise the troubled real estate market.

This helped to push shares higher in China today, where the CSI 300 index has jumped over 4%. It also ralied on Tuesday after China’s central bank announced a package of new stimulus measures.

Mining companies in London are rallying too, with coppper producer Antofagasta up 5.4% so far today.

Germany’s economy is on track to shrink slightly this year, according to a gloomy new forecast from the country’s leading economic research institutes.

The Joint Economic Forecast Project Group have forecasts that Germany’s GDP will decline by 0.1% during 2024. Six months ago, they predicted it would grow by 0.1%, but have lowered that forecast following signs that the economy is struggling.

For 2025, they have cut their growth forecast to 0.8%, down from 1.4% expected before.

The Group warns that Germany’s economy has been stagnating for more than two years, and it does not expect growth to return to its pre-coronavirus trend for the foreseeable future.

They warn that German factories are suffering from higher energy costs, which is hurting their competitiveness, and increasing competition from high-quality industrial goods from China.

Dr. Geraldine Dany-Knedlik, head of Forecasting and Economic Policy at the German Institute for Economic Research (DIW Berlin), explains:

“In addition to the economic downturn, the German economy is also being weighed down by structural change.”

“Decarbonization, digitalization, and demographic change – alongside stronger competition with companies from China – have triggered structural adjustment processes that are dampening the long-term growth prospects of the German economy.”

Germany’s economy shrank slightly in the second quarter of this year. A second contraction in the current quarter (July-September) would put it into a technical recession.

Elon Musk has hit back at the UK, following the news that he won’t be on the guest list for next month’s International Investment Summit.

Posting on his social media site, X (formerly Twitter), Musk renews his criticism of the Labour government, posting:

I don’t think anyone should go to the UK when they’re releasing convicted pedophiles in order to imprison people for social media posts.

Musk is referring to the prison early release scheme initiated by the new government, which has warned that the system is “on the point of collapse” due to a lack of prison places.

The government initially said the early release scheme would not apply to the most serious offenders, but later confirmed that prisoners who have completed a sentence for a serious crime and are now serving a consecutive sentence for a lesser one would qualify.

Last month, two men were jailed for stirring up hatred and violence online after the Southport attack; one for Facebook posts advocating an attack on a hotel in Leeds, the other for posts on X calling for mass deportation and for people to set fire to hotels housing asylum seekers.

Update: Musk has been given an endorsement from Conservative MP Kemi Badenoch, a candidate to lead the opposition Conservative Party; she says she’s a “huge fan”…