UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

Oil choppy as Saudi Arabia pulls out of Monday meeting

U.K. stocks dropped for the first time in three sessions on Monday, with oil producers among the biggest decliners on growing concerns OPEC will fail to reach an output deal at a closely watched meeting this week.

The FTSE 100 index slumped 0.6% to close at 6,799.47.

The downbeat sentiment came as traders looked ahead to the Organization of the Petroleum Exporting Countries meeting in Vienna on Wednesday. The big question is whether the 14 cartel members will agree on an output freeze or cut, which is seen as a way to stabilize the oil market and send prices higher.

See also: OPEC deal in doubt, and that means $30 oil -- analysts react to latest developments (http://www.marketwatch.com/story/opec-deal-in-doubt-and-that-means-30-oil-analysts-react-to-latest-developments-2016-11-28)

Hopes that a deal will be hammered out have faded after OPEC kingpin Saudi Arabia said it won't meet with Russia (http://www.marketwatch.com/story/saudi-arabia-wont-attend-pre-opec-meeting-with-russia-others-2016-11-28) and other non-OPEC producers at a meeting on Monday. The move sent crude prices down 4% on Friday, and oil initially traded lower on Monday, adding pressure on the U.K.'s oil companies, but then erased losses (http://www.marketwatch.com/story/crude-remains-under-pressure-after-saudis-back-out-of-russia-meeting-2016-11-28).

Shares of BP PLC (BP.LN) (BP.LN) lost 0.6%, while Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) fell 1.9%. Outside, the main benchmark, shares of Tullow Oil PLC (TLW.LN) dropped 1.3%.

"As per usual it's all about who will have do the business of cutting or capping output, with both Iran and Iraq reluctant to cut or cap too much, while Russia has paid lip service to a production freeze only," said Michael Hewson, chief market analyst at CMC Markets, in a note.

"Without an agreement from these three any prospect of a deal is dead in the water, and while no one will want to do Saudi Arabia any favors, if there is no deal oil prices could fall further, and back below the July lows just above $40 a barrel," he added.

Other movers: Banks were also on the decline ahead of the Bank of England's stress results due on Wednesday.

Shares of Royal Bank of Scotland Group (RBS.LN) (RBS.LN) dropped 2.6%, Barclays PLC (BCS) (BCS) slipped 1.7%, and Lloyds Banking Group (LLOY.LN) fell 1.6%.

"Royal Bank of Scotland is the biggest concern given it struggled in the European Banking Authority health check earlier in the summer, and it also has the prospect of a rather large fine hanging over it from U.S. regulators, in relation to mortgage backed securities, similar to Deutsche Bank," Hewson said.

Standard Chartered PLC (STAN.LN) gave up 0.7%. Reuters reported on Monday that the Asia-focused bank is set to cut about 10% (http://www.reuters.com/article/us-stanchart-redundancies-idUSKBN13N0NB) of its global corporate and institutional banking staff.

On a more upbeat note, precious-metals producers rose as gold and silver rallied roughly 1%.

Shares of Polymetal International PLC (POLY.LN) added 3.2%, Randgold Resources Ltd. (RRS.LN)(RRS.LN) gained 4.3% and Fresnillo PLC (FRES.LN) climbed 3.7%.

There were no major economic reports for the U.K. due on Monday.

(END) Dow Jones Newswires

November 28, 2016 12:15 ET (17:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.