The oil supermajors BP and Shell have had billions wiped from their market value today after the global oil price slumped amid signs that Saudi Arabia is preparing to return to higher oil output.

The world’s biggest oil producer is reportedly planning to abandon its strategy of withholding crude exports to help drive global oil market prices towards $100 a barrel in favour of producing more barrels at a lower price.

The major strategy shift, first reported in the Financial Times, caused the Brent crude oil price to slump by more than 2% on Thursday morning to below $72 a barrel and triggered a swift selloff of shares in Shell and BP.

The oil companies are the biggest fallers on the FTSE 100 index so far today, with Shell’s share price down 4.6% at 2,414p a share and BP tumbling by 4.8% to 381p.

The latest slump in the global oil price means the market is now almost 28% lower than the average price in 2022 when Russia’s invasion of Ukraine caused the market price to surge to $99 a barrel.

Saudi Arabia and its allies in the Organisation of Petroleum Exporting Countries (Opec) have attempted to keep oil prices as close to $100 a barrel as possible by reducing their production since November 2022. However, they have been unable to keep the market from tumbling due to jitters across the global economy.

Riyadh will reportedly now allow its state-owned oil company, Saudi Aramco, to pump more crude into the global market from this December in an apparent surrender to the reality of weaker oil markets.

Libya is also expected to resume crude exports after the country’s eastern and western regions agreed on the process of appointing a central bank governor to oversee the country’s oil revenues, effectively pouring more crude into an oversupplied market.

Oil prices have continued to fall in recent months despite the Opec production cuts, the ongoing conflict in Ukraine and the escalating conflict in the Middle East, mainly as a result of shaky economic data from China, which is the world’s largest oil importer.

There was a short-lived bounce in oil prices after Beijing set out its biggest fiscal stimulus package since the pandemic earlier this week but prices had retreated again before concerns emerged that Saudi Arabia could flood the market with extra barrels.

Ole Hvalbye, a commodities analyst at SEB, said Saudi Arabia is likely motivated by a desire to regain its share of the global oil market as rival producers including the US ramp up their output.

Hvalbye said:

“For months, the market has been sceptical about whether Saudi Arabia would follow through with the production increase, but the recent rhetoric indicates that they may act on their initial plan.”

The gold price has climbed to a new record high today.

Spot gold traded as high as $2,679.99 per ounce today, a new peak, meaning it has gained around 30% so far this year.

Silver is also rallying, hitting its highest since late 2012.

Precious metals prices have been pushed higher by the weakness of the US dollar, which has fallen as the US Federal Reserve cut interest rates sharply this month.

David Morrison, senior market analyst at Trade Nation, says September is turning out to be a good month for gold.

This is turning out to be a good month for gold. It began on the back-foot after traders returned from US Labor Day holiday and sent prices down to the lower end of a month-long trading range.

Since then, it has rallied 8%, and closing in on $2,700. Can it make it? Gold has come a long way without a significant pullback, and only a brief period of consolidation so far this month.

The UK has sanctioned five ships and two other shipping entities which are involved with transporting Russian liquified natural gas (LNG).

The Foreign Office says this is the first time the UK is using its new ship specification power to target LNG vessels directly.

It is attempting to squeeze Russia’s energy revenues, which are a critical source of funding for the war in Ukraine.

The sanctioned ships are called Asya Energy, Pioneer, North Sky, SCF La Perouse and Nova Energy, and the sanctioned entities are White Fox Ship Management and Ocean Speedstar Solutions OPC.

The Foreign Office says today’s sanctions build on previous curbs on the Arctic LNG 2 project on Russia’s northern coastline.

Russia has plans to expand its LNG revenues, aiming to grow their global LNG market share from 8% to 20%.

Earlier this year, the UK sanctioned Arctic LNG 2, alongside our allies in the US and EU. Since then, the project has been forced to slash production. Today’s action builds on this by targeting ships and entities involved in the Russian LNG sector, which engage with projects important to Russia’s future energy production.

China is reportedly planning a massive debt splurge to fund new stimulus measures to support its economy.

According to Reuters, the Beijing government are planning to issue special sovereign bonds worth about 2 trillion yuan (£213bn) this year as part of a fresh fiscal stimulus push.

Earlier today, Chinese leaders pledged to deploy “necessary fiscal spending” to meet this year’s economic growth target of roughly 5%.

An official readout of a monthly meeting of top Communist Party officials, the Politburo, also included guidance to the government to support household consumption and stabilise the troubled real estate market.

This helped to push shares higher in China today, where the CSI 300 index has jumped over 4%. It also ralied on Tuesday after China’s central bank announced a package of new stimulus measures.

Mining companies in London are rallying too, with coppper producer Antofagasta up 5.4% so far today.

Germany’s economy is on track to shrink slightly this year, according to a gloomy new forecast from the country’s leading economic research institutes.

The Joint Economic Forecast Project Group have forecasts that Germany’s GDP will decline by 0.1% during 2024. Six months ago, they predicted it would grow by 0.1%, but have lowered that forecast following signs that the economy is struggling.

For 2025, they have cut their growth forecast to 0.8%, down from 1.4% expected before.

The Group warns that Germany’s economy has been stagnating for more than two years, and it does not expect growth to return to its pre-coronavirus trend for the foreseeable future.

They warn that German factories are suffering from higher energy costs, which is hurting their competitiveness, and increasing competition from high-quality industrial goods from China.

Dr. Geraldine Dany-Knedlik, head of Forecasting and Economic Policy at the German Institute for Economic Research (DIW Berlin), explains:

“In addition to the economic downturn, the German economy is also being weighed down by structural change.”

“Decarbonization, digitalization, and demographic change – alongside stronger competition with companies from China – have triggered structural adjustment processes that are dampening the long-term growth prospects of the German economy.”

Germany’s economy shrank slightly in the second quarter of this year. A second contraction in the current quarter (July-September) would put it into a technical recession.

Elon Musk has hit back at the UK, following the news that he won’t be on the guest list for next month’s International Investment Summit.

Posting on his social media site, X (formerly Twitter), Musk renews his criticism of the Labour government, posting:

I don’t think anyone should go to the UK when they’re releasing convicted pedophiles in order to imprison people for social media posts.

Musk is referring to the prison early release scheme initiated by the new government, which has warned that the system is “on the point of collapse” due to a lack of prison places.

The government initially said the early release scheme would not apply to the most serious offenders, but later confirmed that prisoners who have completed a sentence for a serious crime and are now serving a consecutive sentence for a lesser one would qualify.

Last month, two men were jailed for stirring up hatred and violence online after the Southport attack; one for Facebook posts advocating an attack on a hotel in Leeds, the other for posts on X calling for mass deportation and for people to set fire to hotels housing asylum seekers.

Update: Musk has been given an endorsement from Conservative MP Kemi Badenoch, a candidate to lead the opposition Conservative Party; she says she’s a “huge fan”…

UK employers remain anxious about the UK’s economic outlook, according to the latest JobsOutlook report from the Recruitment & Employment Confederation (REC).

It has found that employer sentiment on the UK’s economic outlook improved by four points in the last quarter. Although that’s encouraging, the index remains in negative territory at -26.

REC says:

This longer than predicted stretch of economic caution also caused the pace at which firms’ confidence in their own business is improving to moderate a little (to +8). This was particularly driven by a marginal drop in confidence during August.

Overall, the Report shows hiring intentions remain positive for firms. It also shows that SMEs are more optimistic about temp recruitment in the short and medium-term, and some evidence of improving sentiment in London, which is always a labour market bellwether. Turning to temporary labour is a common way of weathering uncertain times for companies.

Newsflash: Switzerland’s central bank has cut interest rates.

The Swiss National Bank hss announced it has eased monetary policy, by lowering its policy rate to 1.0%, from 1.25%, its third rate cut of the year.

It acted after inflation in Switzerland fell to 1.1% in August, down from 1.4% in May, saying:

Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter. Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months.

The SNB also hinted that rates could be cut again soon, adding:

The SNB’s easing of monetary policy today takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.

The move comes two weeks after the European Central Bank lowered its key rates.

In March, the SNB became the first major central bank to cut interest rates, which it followed up with a second cut in June.

Confidence in Thames Water’s ability to repay its debts is also falling.

Two credit rating agencies have downgraded Thames Water overnight, concerned that Britain’s largest water provider is running out of money.

S&P lowered its ratings on Thames’s class A and class B debt to ‘CCC+’ and ‘CCC-’ respectively, close to default levels.

It blamed Thames’s announcement last week that it could run out of cash in December unless it can rewrite its loan terms.

S&P says this came as a surprise:

On Sept. 20, 2024, Thames Water Utilities Finance PLC (Thames Water) announced that its liquidity sources only cover its liquidity needs until December 2024, unless it obtains senior creditors’ approval to release £0.38 billion of cash reserved under its financing covenants and unless it can draw on its £0.42 billion revolving credit facility (RCF) line.

This announcement is contrary to our previous expectation in July, based on the company’s disclosure, that liquidity would last the company through May 2025.

Moody’s is also concerned that Thames Water is close to defaulting on its loans.

Moody’s cut Thames Water’s corporate family rating to Caa1 from Ba2, saying:

Today’s downgrade reflects a significantly tighter liquidity position than previously expected and our view that this will likely lead in the near term to a distressed exchange, where creditors agree to some form of amendment or extension of credit terms that results in a loss, or a loss is otherwise imposed on them, relative to the original promise to pay.

A distressed exchange of this type constitutes a default by Moody’s definition. In the medium term, inability to attract new equity funding may ultimately lead to a creditor-led debt restructuring or one that is imposed as part of a special administration process, should the company meet the criteria for special administration to be called.

UK consumer confidence has been hit by fears over the budget, and the government’s gloomy warnings, a new survey has found.

The British Retail Consortium has reported that households’ assessment of the general economic situation over the next three months has slumped this month.

People are also more worried about their personal financial situation, following heavy hints from Downing Street that October’s budget will include tax rises.

The BRC’s measure of households’ assessment of the general economic situation over the next three months sank to -21 in September from -8 in August.

Older people’s confidence in economic outlook has taken a particular blow, the BRC says – perhaps a sign of the damage caused by the cuts to winter fuel payments for pensioners.

Helen Dickinson, chief executive of the British Retail Consortium, says consumer confidence “fell significantly” in September, adding:

Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence in the economic outlook, particularly among older generations.

Despite this, expectations for future retail spending, while negative, did not yet appear to have been adversely affected, with many consumers expecting to reduce the amount they save instead.

Here’s the details of the BRC’s Consumer Sentiment Monitor:

• Personal financial situation worsened to -6 in September, down from +1 in August.

• State of the economy worsened significantly to -21 in September, down from -8 in August.

• Personal spending on retail, improved slightly to -8 in September, up from -9 in August.

• Personal spending overall fell to +10 in September, down from +11 in August.

• Personal saving fell to -9 in September, down from -4 in August.

This is the second survey in less than a week to show a slide in consumer optimism this month.

Last Friday, market research group GfK reported that consumer confidence in the UK has fallen to its lowest since March, amid growing concerns over government plans for a “painful” budget.

Back in the UK, Elon Musk’s comments about this summer’s UK riots have cost him a place at next month’s International Investment Summit, the BBC reports.

The Summit is part of the Labour government’s push to stimulate economic growth, by attracting more spending to the UK, and is expected to take place at a central London location.

The goal is to show that the UK is “open for business” under a new government.

But, the BBC’s Faisal Islam reports that Musk, currently the world’s richest person, has not been invited to the International Investment Summit in response to his social media posts during last month’s riots, explaining:

During the August riots, Mr Musk shared, and later deleted, a conspiracy theory about the UK building “detainment camps” on the Falkland Islands for rioters, on X – the social media platform he owns.

At the time ministers said his comments were “totally unjustifiable” and “pretty deplorable”.

Last month, Downing Street criticised Musk after he posted on X that “civil war is inevitable” under a video of violent riots in Liverpool.

The Guardian reported earlier this week that business leaders have warned that the global investment summit risks falling flat, amid growing frustrations over high costs of involvement and its timing two weeks before the budget.

Stephen Phipson, the chief executive of Make UK, which represents 20,000 manufacturing firms across the country, said:

“It’s the wrong way round. There is a concern about the timing, coming two weeks before the budget.

People will want to know what the government’s priorities are before committing investment.”

The European Bank for Reconstruction and Development has also cut its growth forecast for Ukraine, warning that it is taking an economic hit from Russian attacks on its energy infrastructure.

The EBRD lowered its forecast for Ukraine’s economic growth to 4.7% next year from 6% in May due to the attacks, following an expected expansion of 3% this year.

Those attacks are forcing Ukraine to rely on more expensive imports as it builds alternative sources of energy, the EBRD points out/

Their chief economist, Beata Javorcik, told Bloomberg:

“More than half of electricity generation capacity was destroyed.

Now, some of the gap is being filled by imports of electricity from Europe, but this electricity comes at a higher cost. So that puts energy intensive industries at the disadvantage.”

Introduction: EBRD cuts growth forecasts

Phillip Inman

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Europe is struggling to cope with much higher energy prices than the US and a lack of investment, putting the brakes on growth, the European Bank for Reconstruction and Development (EBRD) has warned.

The bank, which lends to countries across eastern Europe, central Asia and north Africa, revised down its expectations of growth this year and next year, saying many countries would be unable to grow more quickly following a resurgence in gas and electricity prices, my colleague Phillip Inman reports.

While oil prices have stabilised at around the average levels seen between 2017 and 2021, “gas in Europe remains relatively expensive, trading at almost five times the US price, and some economies in the EBRD regions are paying significantly higher average import prices for gas than Germany.” the bank said in its latest Regional Economic Prospects report.

Expected growth across the EBRD region this year was downgraded by 0.2 percentage points from a previous forecast in May to 2.8%.

In 2025, it expects growth of 3.5%, 0.1 percentage point below the previous projection.

“Our economies are steadily adjusting to evolving global dynamics,” said Beata Javorcik, the EBRD’s chief economist.

“The easing of inflation and recovery in real wages offer encouraging signs.”

However, “ongoing vigilance” would be required as economies adapt to renewed inflationary pressures, concerns about energy security following a flare-up in the middle east conflict, trade wars and high interest rates.

Javorcik said high energy prices and a lack of investment had brought Europe to a “crisis point”.

Earlier this month Mario Draghi, a former prime minister of Italy, told EU leaders they needed to club together and spend about 4.5% of the economic bloc’s annual income on investment to boost long term growth prospects.

Javorcik said the report, which was dismissed by German finance minister Christian Lindner, would provide the basis for a discussion about Europe’s competitiveness and the need for investment finance across all 27 EU nations.

The agenda

• 7am BST: German consumer sentiment report from GfK

• 8.30am BST: Switzerlan’s central bank sets interest rates

• 1.30pm BST: US GDP report for Q2 2024 (final reading)

• 2.20pm BST: Federal Reserve chair Jerome Powell to speak at the 2024 US Treasury Market Conference in New York

• 2.30pm BST: ECB president Christine Lagarde speech at a conference on “New Frontiers in Macroprudential Policy” in Frankfurt.