Soaring oil prices lead FTSE to three-year high

The London market reached a new three-year high today as the soaring price of crude delighted investors in oil majors.

The FTSE 100 Index ended the session 36.7 points ahead at 5327.5, just short of its intraday high of 5330.6.

Traders took full advantage of the the cost of US light crude staying above 61 dollars a barrel, lifting BP by 9p to 634p and Royal Dutch B shares – the most commonly held in the UK after the recent unification of the oil giant – by 18p to 1853p.

The fact that the oil sector accounts for around 20% of the top-flight index was a key factor behind the market’s solid progress.

The Dow Jones Industrial Average rose 65.5 points as US firms reported better-than-expected earnings for the second quarter.

Energy shares led the advance after Transocean, the world’s largest offshore oil and natural gas driller, posted profits ahead of analysts’ estimates and Chevron was left as the sole bidder for Unocal.

Maxim Integrated Products said sales may beat expectations, lifting semiconductor makers.

Back in the City, insurer Royal & Sun Alliance put back some of yesterday’s losses to stand 1.5p higher at 89.75p.

British Airways also held firm in the face of high oil prices, with the airline up 4.5p at 287p after benefiting from the positive mood surrounding results from European low-cost airline Ryanair.

Elsewhere, banking group Alliance & Leicester regained lost ground to close 2.5p up 886.5p after it unveiled news that core operating profits rose £1 million to £263 million, beating analysts’ expectations.

The sole faller in the sector was Lloyds TSB slipping 0.5p to 488p.

Industrial gases group BOC rose 3p to 1074p despite disappointing the market with a 9% fall in profits to £118.9 million in the three months to June 30, lower than City forecasts.

Engineering group Smiths was the biggest victim in the Footsie, down 19.5p to 938p after disappointing investors with its full year profits forecast and warning of higher one-off costs.

And Imperial Leather soap maker PZ Cussons was the heaviest faller in the FTSE 250 Index after the impact of high oil prices on key packaging materials contributed to flat annual profits. Shares fell nearly 5% or 60p to 1190p.

A number of construction-based stocks were in the red after housebuilder Ben Bailey reported an 18% fall in half year pre-tax profits. Its shares weakened 9%, down 42.5p to 397.5p, after it said a slowdown in the second hand housing market led to uncertainty among prospective buyers.

This had an impact on a string of others in the sector, including estate agency group Countrywide, off 15.5p to 319.5p, and Taylor Woodrow, down 8p to 331.5p.

Biggest risers were National Grid up 13.5p to 533.5p, BHP Billiton gaining 20p to 810p, ICI lifting 6.25p to 269.25p and O2 advancing 3.25p to 141.25p.

Biggest fallers were Smiths Group down 19.5p to 938p, Amvescap losing 7p to 420p, Kelda off 8.5p to 703p and BPB sliding 6.5p to 708p.