Europe Stocks Drop Third Day as OPEC Outlook Weighs on Oil Firms

A drop in oil and gas companies sent European stocks down a third day after OPEC said it sees demand for crude in 2015 at the weakest level in 12 years.

The Stoxx Europe 600 Index declined 0.3 percent to 339.32 at the close of trading, erasing an earlier advance of as much as 0.9 percent. A measure of energy stocks retreated to a three-year low, posting the worst performance among 19 industry groups on the Stoxx 600. Royal Dutch Shell Plc, BP Plc and Total SA lost more than 1 percent.

“With oil prices in free fall, we’ve come to a point where it’s very difficult to be a buyer,” said Steven Santos, a broker at X-Trade Brokers DM SA in Lisbon. “The lower demand for oil also suggests lower economic growth, and this negativity is spreading across most asset classes. When you add this to the political turmoil coming from Greece, it’s a dangerous combination for the markets. Looks like we might not get that Santa rally after all.”

The Organization of Petroleum Exporting Countries cut the forecast for how much crude oil it will need to provide in 2015 amid surging U.S. shale supplies and lower estimates for global consumption. That sent Brent to its lowest price in more than five years. European oil and gas shares have tumbled 27 percent from a high in June.

Greece’s benchmark gauge fell 1 percent today, extending losses after yesterday tumbling the most since 1987. The prospect of a snap parliamentary election has fueled speculation that an anti-austerity party may gain more power in domestic politics. Banks were the biggest drag on the index, with Eurobank Ergasias SA down 3.8 percent, Piraeus Bank SA losing 3.6 percent, and National Bank of Greece SA dropping 1.8 percent to its lowest price since at least 1992.

Europe Volatility

The rout spread across European stocks and spooked investors, with a measure of euro-area volatility yesterday surging the most in nine months. The VStoxx Index, a gauge of options prices on the Euro Stoxx 50 Index, reversed earlier losses today to gain 1.4 percent to 21.73, the highest level in a month.

Even after the biggest three-day drop in almost eight weeks, European stocks are not far from recent highs. The Stoxx 600 reached its highest level in almost seven years on Dec. 5, with Germany’s DAX hitting a record, amid speculation that the European Central Bank will consider quantitative easing at its January meeting. Optimism that the ECB will buy government bonds spurred investors to send money in November to a fund tracking the region’s equities for the first time in five months.

Some stocks moved on corporate news today. Sika AG fell for a third day, losing 5.3 percent. The Swiss adhesive company’s founding family is seeking to replace the chairman and two board members who oppose a sale of a controlling stake to Cie. de Saint-Gobain SA.

Ashtead Group Plc rallied 9.1 percent after reporting better-than-estimated first-half profit, and saying annual financial results will exceed its previous forecasts.

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