Market Report: Oils climb on fears output may face new disruption

Talk about good timing. As analysts raised their oil forecasts for 2012 yesterday, citing concerns over the potential for unrest around the world to disrupt production, the black gold's price jumped amid rumours of escalating tension with Iran.

The price of a barrel of Brent crude for January delivery leapt as high as $111.10 in the wake of fears of a possible closure of the highly strategic Strait of Hormuz. The concerns were stoked by reports earlier in the week claiming Iran's military would practice a closure of the channel, through which it is estimated 40 per cent of the world's oil exports travel.

Although oil prices eased back following confirmation the strait remained open, the oil groups on the top-tier index managed to keep hold of their gains. BG Group moved 42.5p higher to 1,367p while BP and Tullow Oil were driven up 7.7p to 452.25p and 41p to 1,369p respectively, with vague bid speculation also being revived around the latter.

The sector was helped by Citigroup increasing its oil forecast for 2012 to an average for Brent of $110 a barrel. Analysts from the broker said that among the factors they expected to support the price of black gold included "geopolitical risks", while they also pointed out that at the moment "Iran ranks as the number one political risk in the oil market".

At the same time, they picked out a number of their favourite stocks in the sector, including Premier Oil (up 5.9p to 377.3p) and Soco International (up 4p to 292.95p). Meanwhile, they downgraded Royal Dutch Shell's rating to "neutral", although the shares still pushed up 63p to 2,388p.

City voices were also putting the spike in oil prices down to vague speculation during the session that the US Federal Reserve could be considering introducing a third round of quantitative easing at some point next year.

That talk helped the FTSE 100 recover most of Monday's losses by rising 62.29 points to 5,490.15, while dealers also pointed to chatter that China may cut its reserve ratio rate for banks again, having done so at the end of last month.

Most of the blue-chip diggers were also mounting some form of rally, including Eurasian Natural Resources and Rio Tinto. They climbed 13p to 647.5p and 66p to 3,185p, with the latter helped by Australia increasing its iron ore export expectations. However, Talvivaara was left 10.2p worse off at 219.7p as Goldman Sachs urged punters to desert the Finnish miner, in part due to fears over the outlook for the price of nickel next year.

Back on the benchmark index, Lloyds managed to shrug off a fall in early trading and close 0.29p stronger at 24.72p. The bank bounced following its recent losses despite coming under attack from Nomura, which cut its rating on the European sector to "neutral".

The broker's analysts predicted trouble ahead because of their belief the EU will go into recession next year, and advised that – among the UK-listed names – HSBC (up 3.75p to 492.5p) and Standard Chartered (down 13.5p to 1,406p) were the safest bets.

While Thomas Cook fell 0.45p to 14.91p ahead of today's preliminary results, its rival tour operator Tui Travel was lifted 0.3p to 152.55p after the group's parent company Tui AG announced it had resolved to sell the majority of its shares in Hapag-Lloyds to Albert Ballin.

Speculation has been persistent that if Tui AG can successfully exit the shipping business, it will use the cash to attempt to reintegrate Tui Travel. However, traders warned punters not to expect deals among the tour operators any time soon.

As a busy week for results continued, the top three spots on the FTSE 250 were all occupied by stocks benefiting from updates being taken well. Domino Printing was the highest, shifting 15.58 per cent to 504.5p, while Imagination and Carpetright climbed 61.5p to 498.5p and 31.6p to 427p. Travis Perkins was less lucky, dipping 14.5p to 800p despite the builders merchant saying it was on course to meet expectations.

However, its admission that like-for-like sales at its Wickes chain had fallen 1.6 per cent since the start of year knocked fellow DIY retailer and B&Q-owner Kingfisher back 2.3p to 245.8p.

Elsewhere on the high street, SuperGroup ticked up 7.1p to 502.5p on hopes the fashion chain – which has not always been the most popular stock in the Square Mile – will impress with its interim figures today.

It proved to be a good session for the smaller oil companies as Rockhopper and Desire Petroleum jumped up 27.75p to 268.5p and 0.5p to 25p on AIM after successful drilling results from their joint Falkland Islands well.

Meanwhile, East Africa-focused Cove Energy revealed it had spudded an appraisal well off the coast of Mozambique and spurted up 8.75p, or 9.31 per cent, to 102.75p in response.