European Oil Companies Plunge as Crude Price Declines

By Nicholas Comfort

Oct. 16 (Bloomberg) -- The Dow Jones Europe Stoxx Oil & Gas Index dropped, led by Europe's two biggest oil companies, as crude prices sank to the lowest in more than a year on concern the global economy will slide into a recession.

The 40-company index fell as much as 6.8 percent to 247.49. Royal Dutch Shell Plc, Europe's largest oil producer, dropped as much as 7.2 percent to 1,294 pence in London, while smaller rival BP Plc lost as much as 6 percent. BP has tumbled 24 percent since oil's record high in July.

Crude futures, which have followed movements in equity markets this month, fell as benchmark indexes from Tokyo to Budapest slumped more than 6 percent. Global stocks have dropped on concern the deepening credit crisis will spur the failure of more financial companies. Efforts to calm markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday.

The MSCI World Index slid 2.4 percent to 927.30 at 12:06 p.m. in London, trimming this week's gain to 1.2 percent on growing concern bailout plans in the U.S. and Europe will fail to avert a recession. Crude oil for November delivery fell as much as 4.5 percent to $71.21 a barrel in New York, the lowest since August 2007, and was at $73.19 at 12:18 p.m. London time.

Oil Weighs on Stocks

``Oil prices are falling on fears we will see a recession,'' Eugen Weinberg, senior commodity analyst at Commerzbank AG in Frankfurt, said by telephone today. Producers ``hang on the oil price, and that's weighing down their stocks.''

U.K. oil and natural-gas explorers Tullow Oil Plc, Dana Petroleum Plc and Cairn Energy Plc all fell more than 10 percent in London trading, while Galp Energia SGPS SA, the Portuguese oil company with operations in Brazil, plunged as much as 13 percent.

Norwegian drilling-services companies Sevan Marine ASA, Prosafe SE and Seadrill Ltd. were the three worst performers in the Dow Jones Europe Stoxx 600 Index. John Wood Group Plc, the U.K.'s largest oilfield-services provider, slipped as much as 14 percent.

Power generators also fell as German electricity for next- year delivery, a European benchmark, dropped to a four-month low on declining oil and coal prices.

The Dow Jones Europe Stoxx Utilities Index retreated 3.23, or 1 percent, to 336.31 as of 12:24 p.m. E.ON AG, the largest weighted company in the group, was trading down 1.2 percent at 27.07 euros in Frankfurt.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net