Rising oil price adds to FTSE jitters

Jul 2 2008 By Alex Turner, LDP Business

THE volatile performance of the FTSE-100 has been carried into the second half of 2008 as the rising price of oil continues to add to market jitters.

The FTSE-100 lost 2.6% yesterday to go below 5,500 points as it started July in inauspicious fashion.

Despite a rally of 96 points on the final day of the half-year on Monday, the FTSE-100 suffered its biggest first-half fall in fourteen years as it lost 831 points – nearly 13% – from its 2008 opening level of 6456.9.

It has been a turbulent six months for the FTSE-100, beseiged by the effects of the credit crunch and rising inflation.

It lost more than 1,000 points to a low of 5,414 points on March 17, before recovering up to 6,376 points on May 19. In the six weeks since that high point the index has lost 750 points at Monday’s close, before yesterday’s 146-point fall.

In the same period the price of oil has climbed, setting record high prices on a weekly, and sometimes daily, basis.

It was on the first trading day of 2008 that the first-ever $100 a barrel trade was made. Although it wasn’t until the end of February when oil prices stayed above the $100 level, it broke through a psychological barrier that is now merely a distant memory.

In March it broke through $110 and in May it reached $130. On Monday it reached its latest high of $143 with expectations of further rises.

Last week the president of oil cartel Opec, Chakib Khelil, forecast that the cost of crude would rise to between $150 and $170 this summer. The Algerian energy minister said he hoped the oil price spike would ease back later in the year and dismissed market fears of a surge above $200 – unless there was a major market crisis.