Commodity crunch: Brent crude oil plunges through $40 – as it happened
Rout sends US and Brent crude to their lowest point since February 2009, as iron ore crumbles to its lowest in a decade
- Latest: Brent crude drops below $40 a barrel
- US crude falls below $37 a barrel
- Iron ore hits lowest since 2005
- Lord Browne: $20/barrel oil isn't impossible
6.11pm GMT
The slump in oil and iron ore has sent commodity companies, and by extension stock markets, sharply lower again. Even a revival in the oil price - Brent crude is currently down 0.9% at $40.34 a barrel after earlier falling as low as $39.81 - failed to make much impact. (Although it did help BP become, surprisingly, just one of two risers in the UK market, the other being a rather more defensive stock in the form of Sainsbury).
Anglo American's decision to scrap its dividend sent its shares moire than 12% lower and, with weak Chinese trade data, helped push mining shares lower. Iron ore fell for the seventh day in a row, down another 1.2% to $38.9, the lowest level since the Steel Index began in 2008. The final scores showed:
5.45pm GMT
In 2010 Anglo American shares scaled the heights to 3421p. Today they closed at 327p - down 90.4%
5.14pm GMT
Brent at $40 leaves oil forecasters poised to play catch-up again https://t.co/8OEbrXyA0S pic.twitter.com/rhuTKBj1w2
5.12pm GMT
The FTSE 100 in the UK - dominated by commodity companies - has ended down 1.42%, its lowest level since the 6118 it reached on 13 November.
Here is the damage done by the mining sector:
4.47pm GMT
Russia will cut spending even further if the oil price continues to fall, according to deputy finance minister Alexei Moiseev.
He told Reuters in London that the government would stick to tight fiscal policies as the economy contracted. He said:
If oil goes to $20, we will need to do additional (spending) cuts. Clearly we have shown that we are very willing to cut fiscal spending in line with an oil price at $60, for example. In order for us to be long-term sustainable (with the) oil price at $40, we need to do additional cuts, but if the oil price goes to $20 we need to do even more cuts.
4.07pm GMT
Of course, one of the reasons for the hefty fall in Anglo American's share price - down nearly 11% at the moment - is that the mining company is dropping its payout to shareholders. There is also the worry that this sets a precedent for the rest of the sectors. Joshua Mahony, market analyst at IG said:
Today's decision from Anglo American to scrap its dividend is likely to be the beginning of a worrying trend for the miners. The attractiveness of owning oil or mining shares has been questionable of late and with the prospect of dividends also being scrapped, the sector is fast running out of reasons to invest. The selloff seen across FTSE commodities stocks highlights the flock to dividend safety with Anglo American likely to be the first of many firms sacrificing its dividend.
The commodities sector will be back in focus tomorrow, following the release of Chinese CPI data. With China firmly at the forefront of traders' minds following the overnight trade data, many will be hoping for a weak CPI reading to advance the view that China will ease once more, spurring on greater domestic consumption and investment.
3.49pm GMT
Mining companies continue to be the day's big losers but oil shares have edged - very slightly - higher as the crude price came back from its worst levels.
Anglo American is currently 11% down while Rio Tinto is off more than 7%. But BP is 1.2p ahead at 348.8p and Royal Dutch Shell A shares have added 2.5p to 15.21. Brent crude is down 0.9% at $40.36 after falling as low as $39.81. But analyst Connor Campbell at Spreadex said:
There is little on the horizon that looks like it can provide a salve for today's commodity burns; if anything, with a Chinese inflation figure released in the early hours of Wednesday morning, a figure that could easily underperform expectations if today's trade balance data is anything to go by, tomorrow may be even worse.
3.29pm GMT
In the UK, the Bank of England is on track to raise interest rates in February after the NIESR think tank said the country's economy grew at around 0.6% in the three months to November.
This is down from the 0.5% figure for the three months to October. NIESR said:
This implies a year-on-year growth rate of 2.2 per cent for the three months to November 2015, compared with 2.3 from the three months to October 2015...
This rate of growth is consistent with the continued absorption of spare capacity in the UK economy and our own view that the Bank of England is most likely to begin to increase rates in February 2016," NIESR said.
3.22pm GMT
Still in the US and monthly job openings came in lower than expected at 5.38m in October compared to 5.53m last month and forecasts of 5.5m.
This is a measure that the US Federal Reserve pays close attention to, but the slightly weaker figure is unlikely to dissuade the central bank from lifting interest rates next week.
2.49pm GMT
Every share on the Dow Jones industrial average is in the red.
Oil giant Exxon is leading the fallers, down 3.1%, followed by major rival Chevron which has lost 2.9%.
2.43pm GMT
US oil companies are dropping sharply in early trading, dragging Wall Street down.
2.36pm GMT
The opening bell is ringing on the New York stock market, and trading is underway.....
2.24pm GMT
At the risk of drifting into domestic politics, the oil price rout would be posing serious questions for an independent Scotland.
Your reminder: Scotland would have been independent in four months from now, fiscal plans predicated on $110/barrel. https://t.co/n0DhOeXmU7
2.08pm GMT
Over in the City, the FTSE 100 index has shed 88 points or 1.4% as shares are buffered by the commodity crunch.
Both oil and mining sectors are in dire straits at the moment.
1.57pm GMT
Here's confirmation that Brent crude has slumped into the $39/barrel region for the first time since the global downturn in 2009, via Bloomberg:
1.47pm GMT
Brent crude has crashed through the $40 per barrel mark for the first time since February 2009.
A barrel of Brent crude, sourced from fields in the North Sea, for delivery in January is changing hands for just $39.95 today.
Brent Oil $39.95 accelerating
Oil market be like... pic.twitter.com/IsDpKTcFwT
1.37pm GMT
The Canadian dollar is a casualty of today's swings.
The 'Loonie' has fallen to a new 11-year low against the US dollar, dropping below 74 cents for the first time in 11 years.
"The prospects of cheaper oil should keep the pressure on the downside despite the deepening oversold conditions in the loonie."
The Canadian dollar has slipped below 74 cents as oil falls to $37.63 https://t.co/QGKUHDxK8n pic.twitter.com/3ebpHKDjUE
1.22pm GMT
Analysts says the oil price is still suffering from Opec's failure to agree production cuts, which means its members are free to pump merrily away.
"OPEC countries will continue to pump as much as possible for now...."So the crude market remains oversupplied."
Such so-called "flash events" have become linked with the growing popularity of high-speed, computerised trading, which has been criticised by institutional investors for fuelling volatility.
CFTC says there have been 35 "flash crashes" in the oil market so far this year https://t.co/PlF2G5fN7V via @FT pic.twitter.com/UgB76GtVVN
1.14pm GMT
Where US oil leads, Brent crude may follow....
Brent oil prices lagging but heading towards $40 a barrel
1.12pm GMT
Oil has suddenly dropped almost 2% to fresh six-year lows, surprising and alarming analysts:
1.08pm GMT
The selloff in the oil price is accelerating, sending crude down to fresh lows.
US crude just crumbled through the $37/barrel mark, for the first time since early 2009.
OIL pic.twitter.com/NOsAmUXyjg
WTI crude breaks $37 a barrel https://t.co/2nvVR7bAvL pic.twitter.com/YTkgZNCrr3
12.48pm GMT
Global stock markets are all falling today, as a sea of red electronic ink sweeps across the City and beyond.
Europe's major equities indices are all down, following losses overnight in Asia. And Middle East markets are also weaker. with Egypt's EGX 30 losing almost 2.4%
Saudi stocks fall 2.5% https://t.co/ETkkgbK0Rf via @fastFT
12.36pm GMT
After a calm start, the oil price is dipping as US traders reach their desks.
US crude has dipped into the red, touching new near-seven year lows.
WTI under pressure again below $37.50
12.13pm GMT
Anglo American is planning to lose around 85,000 workers, under the restructuring plan announced by the troubled miner today.
That's on top of the dividend freeze that will last 18 months.
In a presentation to investors, Anglo American said it would reduce its number of mines from 55 to about 20 and cut employee numbers from 135,000 to less than 50,000 after 2017. It will halve the number of business units from six to three: the De Beers diamond operation, industrial metals and bulk commodities.
The company, which mines iron ore, manganese, coal, copper and nickel, said it would cut capital spending by a further $1bn (670m) to the end of 2016, taking the reduction in capital spending to $2.9bn by the end of 2017. It increased the amount it plans to raise from asset sales to $4bn from $3bn....
Related: Anglo American to slash workforce by 85,000 amid commodity slump
11.45am GMT
Iron ore is slipping further below $40/tonne to new 10-year lows....
Iron ore down again pic.twitter.com/vMlixiSeSZ
11.19am GMT
Britain's factories could face a tough winter, as the challenging global economy hits demand for exports.
New data shows that UK manufacturing output shrank by 0.4% in October, meaning the sector is still below its peak in 2008.
Official figures showed that while George Osborne has pledged to unleash a "march of the makers", manufacturing output in October stood 0.1% lower than the same month in 2014 - and remains 6.1% below its pre-recession peak.
Overall industrial production, which includes mining and utilities, as well as manufacturing, increased just 0.1% in October on the previous month, and 1.7% higher than a year earlier; but economists pointed out that the rise was driven by a sharp swing in gas output.
Related: UK manufacturing expects hard winter ahead
Production up 0.1% in Oct (Manufacturing down 0.4%). But do attempts to rebalance economy ignore Canute's example? pic.twitter.com/zICfVjkOXO
11.13am GMT
Bloomberg's commodity index, which tracks every significantly traded commodity (coal, oil, gas, coffee, hog futures...) has been dragged down to a 16-year low.
DB's Reid: 'At this rate it'll be cheap enough to decorate the tree with all sorts of commodity based products' pic.twitter.com/pBvabBi6TC
11.02am GMT
Mining giants could be in serious trouble if the iron ore price keeps falling.
John Kovacs, senior commodities economist at Capital Economics in London, says producers will be desperate to see the price rise back over $40 per tonne pronto.
"The big four will find it hard to maintain output at below $40.
"If prices remain weak, output from the highest-cost mines of the big four will be under pressure."
Iron Ore in $30s Seen Near Tipping Point for Largest Miners https://t.co/wndahPm7dj via @business pic.twitter.com/BeGOKRu3Uo
10.51am GMT
The slump in the iron ore price reflects falling demand for steel in China.
And that could become a bigger problem - as surveys suggests that China's factory sector is still struggling, pushing prices down.
"Steel market conditions in China continue to deteriorate and weak domestic demand has been exacerbated by the onset of cold winter weather, which heralds a slowdown in construction activity."
10.16am GMT
Iron ore has hit its lowest level in a decade, according to new industry data today.
Reuters has the details:
Benchmark 62-percent grade iron ore for delivery to China's Tianjin port fell 1.3% to $38.90 a tonne on Monday, according to The Steel Index (TSI), falling for a seventh straight day.
It was the lowest on record by TSI since it began collecting data in 2008. Under the annual pricing regime that preceded the spot-based system, it was the lowest since 2005, based on data compiled by Goldman Sachs.
Once the post-OPEC concern about a lack of storage and on-going excess supply fade, there's a good chance that oil will continue to out-perform iron ore, which is obviously more tied to the (soggy) Chinese economic outlook.
9.45am GMT
Lord Browne, the former boss of BP, is discussing the situation on Bloomberg TV (who are all over the commodities story today)
In the end it is about Opec. It is the only swing producer, and it's looking to protect its market share.
It is a foolish business to be in.
In the long run, $20 is probably wrong, but that's as far as I'd go.
9.29am GMT
Mike van Dulken, head of research at Accendo Markets, also reckons that more mining giants may suspend shareholder payments, following Anglo's lead today.
Commodity prices continue to fall, looking like they'd prefer to be back in the ground themselves and Anglo American (AAL) is the latest of the mining majors to capitulate and suspend dividends.
Following hot on the heels of Glencore (GLEN) which is racing to cut debt and also decided to deprive loyal investors of income for a while, the question is whether we are set to see a rush of others doing the same to protect balance sheets in the face of tanking material prices and much reduced demand.
9.23am GMT
How bad could the commodity crunch get?
Claus Vistesen, economist at Pantheon Economics, reckons that we could see some energy companies actually collapse:
One or more (or a lot!) of these big energy companies will have to go bust. It won't stop until that happens I think.
The pain is now widespread, with lots of shares down 60 to 70% this year.
The world is still going to need some iron ore, we're still going to want some gold, and these are the companies who are going to produce it for us.
9.17am GMT
The London stock market's mining sector is now at its lowest level in over 10 years, as every company is hit by the deepening selloff:
Anglo have triggered a sell-off in the sector - a sea of red as London miners fall to lowest since 2004 pic.twitter.com/v7XKjqb0ew
9.13am GMT
Oil companies could be forced to follow Anglo American's lead and cut their own payments to shareholders.
That's according to Andy Lynch of Schroder Investment Management, who is discussing the commodity crash on Bloomberg TV now.
Some of them will have to start looking at whether the dividend is sustainable, or try the old trick of moving to paying the dividend partly in cash and partly in shares.
9.06am GMT
Sheesh... Anglo American's shares have now tumbled by over 8% this morning to a fresh record low.
8.55am GMT
The slump in iron ore and oil prices could deliver a new dose of deflation to advanced economies.
Jeremy Cook, economist at World First, warns that prices may have further to fall.
Both oil and iron ore prices took a substantial beating yesterday, dragging commodity currencies lower and increasing the fears of additional deflationary pressures through developed economies in the coming year.
OPEC's decision to hold production at current levels on Friday, keeping the supply glut in essence, alongside continually poor economic data from the developing world has maintained the double-whammy of disappointment for commodities in general. Demand is weak and supply is massive; prices are coming lower with some business pages talking about oil at $20 a barrel. It is currently trading at $37.
World First Morning Update December 8th - Commodities signal further declines, deflation concerns - https://t.co/fA3Po8Flcn
The price of a barrel of Brent Crude Oil is US $41 this morning after yesterday's heavy price falls of around 5% #Disinflation
Should the price of crude oil stay down here we could see 1 per litre at the pump in the UK #disinflation
8.47am GMT
After yesterday's tonking, the oil price has gained around 0.5% today.
8.37am GMT
Mining shares are dragging the London stock market down in early trading.
Anglo American has lost 2.7%, as investors digest the news they won't get a dividend until 2017 (at the earliest).
Reports are circulating suggesting that iron ore spot prices have fallen to the lowest level ever recorded despite a marked jump in Chinese imports and this sentiment is certainly being priced in with the heavyweight miners scattered across the foot of the index.
8.27am GMT
The iron ore price has fallen further today, losing another 1% to $39.06.
It has shed almost 40% this year, which is one reason that Anglo American has been forced to announce such drastic cuts.
8.22am GMT
Next casualty of commodity rout: Anglo American suspends 2H 2015 & 2016 dividends as BBG Commodity index at 17y low. pic.twitter.com/tjFYITLC1M
8.21am GMT
Kieron Hodgson, mining analyst at City firm Panmure Gordon, has told Bloomberg TV that he expects other mining companies to follow Anglo American's lead and suspend their dividends too.
8.14am GMT
Another troubled mining company is making major changes, in an attempt to ride out the commodity slump.
8.03am GMT
There is one piece of good news this morning - Japan isn't in recession after all.
Updated GDP data shows that the Japanese economy expanded by an annualised rate of 1% in the last quarter.
7.57am GMT
The commodity crash has forced Rio Tinto to slash its spending plans, in a signal that the sector is hunkering down.
Rio, which is the world's second-largest miner after BHP Billiton, is cutting up to $1bn off its capital expenditure bill for 2016, in the face of falling metals prices. It has also lopped off around $500m off this year's bill.
It expects total capital expenditure in 2016 will be around $5bn, compared to previous forecasts of less than $6bn.
It previously cut this year's budget from $5.5bn to $5bn.
Rio Tinto slices almost $1bn off spending plans https://t.co/NbVHaCbSGF
7.53am GMT
Shares in the world's largest mining companies have slumped to their lowest levels since the financial crisis, or even earlier.
The latest falls in the prices of iron ore, oil, copper, zinc and other commodities is further bad news to a sector that has already suffered a year to forget.
7.44am GMT
7.40am GMT
New trade data from China has reinforced fears over its slowing economy.
Chinese exports shrank by 6.8% year-on-year in November. That's a bigger fall than expected, and the fifth monthly decline in a row.
Good morning from Berlin. Asia markets taking a hit from weak trade data out of #China & plunging commodity prices. pic.twitter.com/S7QNQuCXwn
"Investors will remain quite sceptical about the true growth conditions of China which will mean that sentiment will remain quite fragile going into 2016."
7.28am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today, we'll be tracking the commodity rout that began in Europe yesterday.
Related: Opec bid to kill off US shale sends oil price down to 2009 low
Iron ore prices slipped further below $40 a ton yesterday and with no evidence of a base in sight, this in turn is likely to turn the screws further on a highly leveraged mining sector.
At the beginning of this year Sam Walsh CEO of Australian giant Rio Tinto asserted that the prospect of $30 a ton iron ore was in the realms of fantasy land, and would never be reached. Given that we are now $9 away this fantasy could well be about to turn into a nightmare.
At presser, @J_Dijsselbloem says plan for "trust fund" of Greek public assets to privatise should be "on the table" before X-mas holiday.
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