The incessant devaluation of crude oil appears to be having little effect upon oil majors today, while Glencore has led the overall market following an upgraded price target from Citi to £1.60. If the FTSE is going to achieve the notorious Santa rally this month, either oil prices will have to turn a corner, or else the disconnect between crude prices and oil stocks, as seen today, will need to continue.
December has no doubt been one of the most notable for years, with both European Central Bank and Federal Reserve action representing considerable uncertainty, driving market volatility. However, with the Spanish elections out the way over the weekend, there is a tangible feeling that the event risk factor to trading will be lower in the final third of December.
Thus while volumes will be lower over the festive period, there is a chance we could actually see more settled markets rather than the typical volatility seen in times of thin volume.
BG and Shell took steps to reassure the markets of their proposed deal, following a £100 million sale of BG stock by Capital Group on Friday. The one hurdle ahead of this deal is shareholder approval on 27-28th January which despite the deteriorating valuations associated with the deal, is expected to provide the final endorsement.
Falling crude prices mean that the price of BG is based upon April prices, yet with the industry suffering heavily, the proposition of a larger merged firm with economies of scale means shareholders are likely to roll the dice and vote the deal through.