European oil giants Shell SHEL 3.05%
PLC and BP BP 5.68%
PLC said they were stepping back further from doing business with Russia, with Shell saying it will immediately halt all spot purchase of crude from the country and will phase out its other trading and business dealings.
A spokesman for BP said it won’t enter into new business with Russian entities or business involving Russian ports “unless essential for ensuring security of supply.”
The two made their moves ahead of what people familiar with the matter say is a plan by the Biden administration to ban Russian oil imports into the US The Wall Street Journal reported an announcement on the issue is imminent. The administration’s deliberations about the ban have ramped up as lawmakers of both parties, including House Speaker Nancy Pelosi, called for action on the issue. The White House declined to comment.
Futures for Brent crude, the global oil benchmark, rose more than 5% early Tuesday. Oil prices for both measures were already up before the Journal report but rose further after.
Shell had previously said it would pull out a number of joint ventures in the country. On Tuesday, it said it would also shut its service stations and aviation fuels and lubricants operations in Russia, and it won’t renew any Russian term contracts. It said it would find alternative supplies of oil as soon as possible, though it cautioned it could take weeks to fully make up the difference, leading to reduced production at some refineries.
Shell faced a backlash last week and over the weekend when it snapped up in charge of Russian crude at a bargain price, after many other players had started to curtail their purchases, creating an informal embargo from some buyers in response to Russia’s invasion of Ukraine.
The company on Tuesday apologized for the purchase and said it would commit from its Russian oil purchases to humanitarian funds aimed at alleviating the crisis in Ukraine. Shell had previously said it would exit its joint ventures with Russian energy giant Gazprom PJSC.
BP won’t charter Russian-owned or Russian-operated vessels where possible, the spokesman said. In cases where it already has, the company “will continue to monitor their safe passage and comply with all applicable sanctions and local restrictions.” The spokesman said the decisions were made in the middle of last week, calling the situation a “rapidly changing and complex area” that BP continues to review. Previously, BP said it would relinquish its nearly 20% stake in oil giant Rosneft,
following pressure from the UK government.
The US and its allies left energy out of an array of economic sanctions imposed on Moscow in response to the invasion. Many refiners, though, went further, shunning Russian crude. Such self-sanctioning has taken a chunk out of global supplies, pushing prices for international benchmark Brent sharply higher. Traders say it is also causing a backup in Russia’s energy supply chain, prompting refiners to cut back production.
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8