Shell and BP shares sink as China slams ‘bully’ US over oil dispute
Shares in FTSE 100 oil giants took a tumble on Wednesday as President Donald Trump ramped up the pressure on Venezuela to hand over oil.
Shell had sunk near four per cent by midday to 2,644.7p whilst BP was down 3.5 per cent to 416.65p. The losses in the oil giants – which make up over £200bn of the blue-chip index’s market cap – weighed on the FTSE 100, dragging it to a 0.6 per cent slump and putting a firm end to the New Year rally.
It came as the price of brent crude – the international benchmark for oil – fell below the $60 mark to $59.97 after a 1.2 per cent slump.
“Record highs for the FTSE 100 and Dow yesterday came as the initial equity bounce reached a peak, but today’s focus is more on the slump in oil prices, which seem to be set for a new push to recent lows,” Chris Beauchamp, chief market analyst at IG, told CityAM.
Oil’s volatility followed Trump declaring Venezuela would be “turning over” $2bn worth of oil to the US – a move that would be set to impact trading relations with China.
The US’ Energy Information Administration estimates Venezuela has near 303bn barrels worth of crude – near 20 per cent of the world’s resource – but exports just 900,000 per day with China acting as the biggest customer.
Beijing has fiercely denounced the US’ actions, with a foreign ministry spokesperson accusing the US of “brazen use of force” and “typical acts of bullying”.
“These actions seriously violate international law, gravely infringe upon Venezuela’s sovereignty, and severely damage the rights of the Venezuelan people,” they added.
New layer in China and US tensions
In a Truth Social post, Trump said the Venezuelan oil would be sold at market prince with money generated controlled by the President.
Analysts said in the wake of President Maduro’s arrest that China would likely be forced to pay higher rates for oil, should the US maintain control of Venezuelan production.
Jordan Rochester, an analyst at Mizuho Bank, said: “By controlling Venezuela, the US doesn’t need to own the oil; it just needs a hand on the tap.
“This shapes global energy flows and decides whether China gets cheap heavy crude or has to pay market rates elsewhere.”
Elsewhere, Trump doubled down on previous claims the US “needed” Greenland with the White House confirming a “range of options” were on the table to acquire the nation, including the use of the military.
It follows top European leaders issuing a joint statement to rally behind Nato member Denmark, which Greenland is a semi-autonomous region of.
“Greenland belongs to its people, and only Denmark and Greenland can decide on matters concerning their relations,” leaders from UK, France, Germany, Italy, Poland, Spain, and Denmark said.
The price of gold – a “safe haven” asset investors flock to amid tensions – reached a fresh peak on Tuesday night at north of $4,500.