FTSE climbs as high oil price pushes up energy shares

Wed Jun 18, 2014 12:04pm EDT

Related Topics

* FTSE 100 closes up 0.2 pct at 6,778.56 points

* High oil prices help energy stocks

* Shire boosted by ongoing bid speculation

* United Utilities, Severn Trent trade ex-div

By Tricia Wright

LONDON, June 18 (Reuters) - Oil companies lifted Britain's blue chip share index on Wednesday as heavy fighting in Iraq pushed crude prices towards $114 a barrel.

Royal Dutch Shell and BG Group rose 1.5 percent and 0.6 percent respectively, helping the UK oil and gas index gain 1.4 percent to make it the top sectoral performer in the FTSE 100.

"The market is very closely watching the escalating violence in Iraq, a major oil producer. In the short term, higher oil prices may benefit some oil companies, but in the longer term, if it continues, it will result in an oil shock," said Henk Potts, equity strategist at Barclays.

"Clearly that would be an overall negative for the economy as higher oil prices have the potential to hurt global growth and raise companies' input costs."

Brent crude oil rose towards $114 a barrel as Sunni militants hit Iraq's biggest refinery, stoking concerns about oil exports from OPEC's second-biggest producer as some firms pulled foreign workers out.

The FTSE 100 closed up 0.2 percent, or 11.79 points, at 6,778.56 points. The index is only up 0.4 percent this year, but is just some 2 percent below its record high hit in late 1999.

Shire topped the blue-chip leader board, rising 3.4 as bid speculation continued to swirl around the healthcare group. It had seen solid gains on Tuesday after sources told Reuters it had hired investment bank Citi as an adviser, expecting to receive takeover approaches.

In the broader market, investors avoided heavy bets ahead of the Federal Reserve's two-day policy meeting. The U.S. central bank is widely expected to cut another $10 billion from its monthly bond purchases, while investors will be watching for any comments on when the Fed would begin to raise interest rates and its outlook for the economy.

Data released on Tuesday showed a surprisingly high reading for U.S. inflation, which sparked speculation of a hawkish tilt to the Fed's policy outlook.

The FTSE was also held back by United Utilities and Severn Trent as the two companies traded without the attraction of their latest dividend payouts.

Their shares fell by 2.8 percent and 2.1 percent respectively. (Additional reporting by Atul Prakash; Editing by Hugh Lawson and Susan Fenton)

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