Oil rally cools as Russia and Ukraine peace talks end
Oil prices fell back below $100 (£75) a barrel after peace talks between Ukraine and Russia came to an end. Kyiv asked for an "immediate ceasefire" as the number of refugees fleeing the country soars.
The reversal came after Russia's ongoing invasion of Ukraine pushed oil prices back above $100 as investor fears over how the crisis will snarl the movement of resources in the region heightened.
Brent crude oil (BZ=F) was 2.1% higher to $99.90, declining from $103.73. The oil benchmark topped $105 a barrel in intraday trading last week, breaching that level for the first time since 2014. West Texas crude (CL=F) was up 3.5% to $94.78.
Investors and banks are worried that Russian president Vladimir Putin could shut off supply as oil and gas prices surge over concerns firms won’t be able to pay for Russian oil and gas.
"Whilst sanctions don’t bar Russian oil and gas exports, many Western banks are taking matters into their own hands and giving Russian energy a swerve," said, Neil Wilson, chief market analyst at Markets.com.
Iran's latest announcement that 98% of a draft nuclear deal is now complete, could help keep a lid on oil prices.
Meanwhile, the UK has attempted to put some fears over supplies to rest.
Commenting on energy security as the Ukraine crisis roils markets, Britain's business secretary Kwasi Kwarteng said the nation does not rely on Russian gas supplies. Instead the North Sea is Britain's "single largest source of gas, with the bulk of our imports coming from reliable Norway".
Read more: How economic sanctions work
Kwarteng said additional UK production wouldn't help to ease the surge in wholesale gas prices and dismissed fracking as a solution.
He added it was crucial to shift towards renewable energy sources as Europe tries to reduce its reliance on Russian gas.
The wholesale price of gas has *quadrupled* in UK and Europe.
Additional UK production won’t materially affect the wholesale market price.
This includes fracking – UK producers won’t sell shale gas to UK consumers below the market price. They’re not charities.
(4/9)— Kwasi Kwarteng (@KwasiKwarteng) February 28, 2022
Natural gas (NG=F) rose 3.1% as the situation worsened. Russia is the world’s largest natural gas exporter, while Ukraine is a key supplier of gas, crops and steel to Europe.
Large amounts of gas are piped from Russia through Ukraine to the European Union, meaning that disruptions pose risks of shortages and will add to inflationary pressures.
Read more: What Ukraine crisis means for consumer prices in the UK
It comes as oil giant BP (BP.L) was forced to cut-ties with Kremlin-controlled energy firm Rosneft (ROSN.ME) following pressure from the UK government.
The FTSE 100 (^FTSE) oil company will offload its 20% previously valued at $14bn. BP CEO Bernard Looney will step down from the Rosneft board along with BP-nominated director Bob Dudley.
The move will not be without significant financial repercussions for the oil firm. Rosneft accounted for nearly a fifth of BP's bumper $12.8bn profits for 2021, contributing around $2.7bn.
"This won’t be a cheap decision because they probably won’t be able to sell it to anyone in the current climate and is likely to mean a total write down of $25bn," said Michael Hewson, chief market analyst at CMC Markets.
The news sent shares in BP crashing, losing 7.5% in early trade on Monday in London.
This move by BP could add similar pressure to rival Shell (SHEL.L) which is facing similar pressure over its Sakhalin (SLEN.ME) assets. The oil giant has a 27.5% share in Sakhalin.
Read more: How Russia's war on Ukraine is impacting stock prices
Shell is working alongside Russia’s state-owned Gazprom on the Sakhalin II project, which included the building of Russia’s first liquefied natural gas plant on Sakhalin island, located in the Sea of Okhotsk in the country's far east.
Shares in Shell crashed 3% on Monday morning in London.
