Oil companies lead FTSE lower as crude prices fall

By Liisa Tuhkanen

LONDON (Reuters) - The FTSE 100 edged lower on Friday, with a decline for commodities stocks, such as BP and Royal Dutch Shell, overshadowing gains in travel group TUI.

The blue-chip FTSE 100 index eased 0.2 percent by 1330 GMT after a near-flat close of 6,568.33 points on Thursday.

Oil producers and oilfield service providers led the losers as U.S. crude oil prices dropped to their lowest in almost 6-1/2 years, with huge stockpiles and refinery shutdowns heightening concerns about global oversupply.

"Ongoing commodity demand restraint in China alongside incremental supply growth out of OPEC and the US continue to be formidable market headwinds," Goldman Sachs said in a note.

Royal Dutch Shell, Weir Group and Tullow Oil all declined more than 1 percent, roughly in line with the FTSE 350 Oil & Gas Financial index.

BP slid the most, down 1.4 percent, after a U.S. judge on Thursday found that it had manipulated the natural gas market in 2008, as alleged by the U.S. energy regulator.

Glencore slipped to touch an all-time low after the miner and commodity trading group said it had sold stakes in three mines for about $290 million.

"It's very difficult to know whether or not we'll see any recovery on that one," London Capital Group analyst Brenda Kelly said.

"Ultimately, the commodities market does remain under pressure," she said.

On the upside, TUI was the biggest blue-chip gainer after JP Morgan and Jefferies lifted their target price on the stock, sending the company up 3 percent after a jump in the previous session when it forecast earnings at the top end of analysts' expectations. [ID;nL5N10O0QV]

Among other individual gainers, chipmaker Arm Holdings edged slightly higher.

"ARM's equity story will continue to be one based on strong top-line growth contributing to sector-leading earnings and cash flow growth," Barclays wrote in a note.

"We see both near- and long-term prospects being as strong as ever, although recent concerns around end market growth have caused a material underperformance for ARM shares."

The FTSE 100 rose to a record 7,122.74 points in late April but has since given up most of the gains it made in 2015.

(Editing by Robin Pomeroy)