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Oil price falls for fourth day on demand fears

Oil prices for a fourth day this morning as traders feared efforts to contain an intensifying credit crisis would fail to stave off a deeper decline in oil demand.

Amid a relatively quiet weekend in the US financial sector after Friday’s passage of a landmark $700 billion bailout bill, in Europe officials scrambled to save three banks while differing on whether to pursue a common bank bailout fund.

US light crude for November delivery fell $1.91 a barrel or 2 per cent to $91.97 a barrel by 5.37am, having slipped just 9 cents on Friday.

Prices are treading near their seven-month low of $90.51 a barrel touched on Sept. 16 after slumping 12 per cent last week, its biggest such loss in almost four years.

London Brent crude dropped $1.90 to $88.35 a barrel.

The US dollar’s rise to a 13-month high versus the euro added to pressure on beleaguered commodities, which slumped more than 10 per cent last week in their biggest-ever weekly loss. Asian stocks tumbled 4 per cent today.

Oil demand in the world’s top consumer has already slumped this year under the weight of record prices, while consumption in Japan and Europe has also weakened, knocking crude off a record peak over $147 a barrel struck in July.

Traders may begin to fear next for China, whose rapid growth helped trigger oil’s rise from just $20 a barrel in 2002.

Though the United States bought breathing room in the credit crisis with a series of takeovers and bailouts, Europe fought at the weekend to contain the fallout.

Germany said it would guarantee more than €500 billion ($693 billion) in private deposit accounts to protect savers from the worst financial crisis since the 1930s. Austria and Denmark quickly followed suit.

German officials clinched a rescue deal for lender Hypo Real Estate, Belgium and Luxembourg found a buyer for Fortis in BNP Paribas, and UniCredit, Italy’s second-biggest bank, announced plans to raise capital.

Just a day after leaders of Europe’s four biggest economies decided against a coordinated bank bailout, Italian Prime Minister Silvio Berlusconi said Italy would revive the idea at a meeting of finance ministers on Monday, but Germany then said it remained opposed to such a measure.

With prices sliding anew, one of OPEC’s most consistent price hawks Iran said that $100 a barrel was too low and urged members of the Organisation of the Petroleum Exporting Countries (OPEC) to respect their quotes to prevent oversupply from worsening.

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By Iain Martin | 00:01:00 | 06 October 2008

Moves by housebuilders to down tools and mothball projects will demolish the government’s new homes target and could trigger another boom-bust cycle, the Royal Institution of Chartered Surveyors has warned.

The government needs 200,000 homes built a year to hit its target of two million homes by 2016, but the total so far this year is only 66,200, said Rics.

Failure to hit this target could see surging house prices if demand outstrips supply, said Rics senior economist Oliver Gilmartin.

‘With finance for projects becoming increasingly difficult to obtain, the government’s ambitious target of two million new houses a year by 2016 is likely to fall well short,’ said Gilmartin.

‘We know for the next year house prices will continue to fall but there is still a requirement to build infrastructure to cater for the needs of an increasing number of households.’

Turmoil in the financial market had lead to core home building projects being scaled back or delayed, he said.

‘A rapid solution to the log jam in credit markets is necessary to limit the severity of the current downturn which is starting to affect the country’s infrastructure,’ said Gilmartin

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Dozens of new business regulations to be implemented this week will add to the unnecessary hours employers already spend dealing with government red tape, the Federation of Small Businesses (FSB), has warned.

While the FSB supports the concept of Common Commencement Dates, there is concern that the volume of new legislation to be released will overwhelm small businesses

New rules to be introduced this Wednesday (October 1st) include changes in payroll and health and safety among others.

FSB research shows that if firms had less administrative duties they could then involve themselves in increased community activity and concentrate more on employee training.

FSB National Chairman John Wright said:

“Businesses will be expected to tackle around 20 new regulations that are being put in place on Wednesday. This goes against government pledges to cut back on the amount of regulation.

“Having a Common Commencement Date goes some way to helping businesses prepare for new regulation but the volume of legislation is just getting too much. In these tough times it is important for small businesses to remain economically active rather than spending their time filling in forms to adapt to new rules.

“The impact and costs of new regulations affecting small businesses should be properly analysed and adapted accordingly.”

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After Ireland, Germany & Denmark - when will the UK remove Business risk?

FTSE plunges 5% after weekend of financial turmoil

By Chris Marshall | 08:56:22 | 06 October 2008

Shares in London fell a precipitous 245 points – a near 5% fall – in early trading as investors absorbed the events of the weekend.

The falls echoed losses in stock markets across Asia and Europe. The German DAX was 4% off first thing on Monday, while the Paris CAC slumped almost 5%.

The declining stock prices were expected after a tumultuous weekend which saw Germany’s government agree a €50 billion (£38.7 billion) plan to bail out mortgage lender Hypo Real Estate.

The German government also said it would guarantee all private German bank accounts, as did the Danish government.

The Financial Times reported this morning that chancellor Alistair Darling is considering moving closer to an effective part-nationalisation of the banking sector by using more taxpayer cash to help the banks. More details on the government’s plans to take shareholdings in UK banks are expected from the first meeting of the prime minister’s Economic Crisis Council today.

In other developments over the weekend, French giant BNP Paribas confirmed it had agreed to buy 75% of Fortis’s operations in Belgium and Luxembourg.

Concerns were also growing over the weekend that the US bail-out plan – signed off on Friday – would not get the money quickly to those who need it, and not halt a global recession.

The banks led the FTSE’s decline early on, with HBOS the worst-hit, falling 42.5p at first, before gaining a little to 171p at 0820.

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We have heard some interesting comments during our Flintshire Business Week, but none more than when the subject of the economy comes up.

A number of businesses have not noticed any damage to their bottom line.

However, it really does depend on which industry you are dealing with. If you are in construction, or a related industry - this is a bad time. To make it worse, it seems that this reputation is regardless of the individual company’s real position. Estate agents, for instance, are having lots of problems with getting credit facilities - just because they are estate agents!

There are other industries where there are no problems with getting funding - however, they tend to be the older ones with a solid credit history of being cash rich, old fashioned, stable, no nonsense businesses. The moral seems to be that business is about risk, and when times get ‘ interesting’, minimising your risk is the most sensible long term option open to you.

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