The global energy markets are continuing to reel from the ongoing conflict in Ukraine. The Kremlin recently put its nuclear forces on alert, further escalating tensions in the overall region. While stocks have plummeted worldwide amidst these developments, the most obvious winner of all this is the energy markets. With oil and gas prices soaring, many companies have enjoyed significant gains. However, many are also facing political pressures as well.
One of which was British Petroleum (NYSE: BP). On Sunday, the energy giant announced that it plans to sell almost all of its Russian properties and investments in the wake of this current conflict. In particular, the company has had meetings with the U.K. government, with the latter strongly encouraging the former to give up its Russian investments.
This would include its 20% stake in Russian government-operated oil producer Rosneft. In doing so, BP could see a potential loss of over $25 billion. BP relies on Rosneft for approximately one-third of all its oil and gas production, so the loss is a big hit.
Additionally, BP announced that both its CEO Bernard Looney as well as former BP CEO Bod Dudley would both resign from Rosneft’s board of directors as well. Considering the considerable fluctuations in Russia’s currency at the moment, there’s a lot of skepticism about whether BP will be able to exit its stake at a reasonable price or not. BP’s 20% stake in Rosneft was originally valued at around $14 billion, but BP’s $25 billion figure likely has to do with both higher oil prices and fluctuating currency/stock prices.
Shares of BP were up over 5.5% following the news. Despite the likely loss to its business, it seems traders’ gut reaction to the news is otherwise positive. Other western energy companies have been encouraged to sell their Russian assets as well, most of which will likely do so quite soon.
Norway said on Sunday that it would freeze and banish all Russian assets from its $1 trillion sovereign wealth fund. The news also follows European and U.S. efforts to cut Russian financial institutions from the Swift network. Even cryptocurrency exchanges like Binance have said they are taking actions against Russia right now, even depriving crypto access to Russians as well.
Oil prices jumped 5.6% over the weekend and are currently trading for around $96.5 per barrel. As the situation continues to worsen, it’s expected that prices will remain this high, if not higher. Russia currently hasn’t done anything to limit its gas exports to Europe, which are a crucial bargaining chip that the Kremlin can use at its disposal if needed. Biden’s recent sanctions were also carefully laid out to not disrupt Russia’s energy exports also.
BP Company Profile
BP is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.3 million barrels of liquids and 9.5 billion cubic feet of natural gas per day, including volumes from its 20% ownership interest in Rosneft. At year-end 2018, reserves stood at 19.9 billion barrels of oil equivalent, 57% of which are liquids. The company operates refineries with a capacity of 1.9 million barrels of oil per day. – Warrior Trading News
