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A week in oil: Ukraine tensions fail to drive oil higher

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The price of Brent crude drifted lower this week despite tensions in Ukraine escalating.

Starting the week up at U$110 a barrel, Brent fell to US$108.41 a barrel on Friday.

The week started with more US sanctions against top Russian executives, including the chief executive of energy giant Rosneft, in which BP (LON:BP.) has a near-20% stake.

Igor Sechin, a close ally of Russian President Vladimir Putin, is the most important energy executive to be targeted by the US sanctions following the Ukraine crisis.

BP received a 19.75% stake in Rosneft following the sale of its interest in TNK-BP to the Russian group.

As the week wore on, more fighting broke out in the east of Ukraine between the army and pro-Russian rebels, with Moscow accused of encouraging them.

The trouble fuelled fears of disrupted energy supply , with the West threatening further sanctions against Russia. However, the sanctions have not yet affected natural gas or oil supplies, which has depressed the oil price.

Russia’s energy minister Alexander Novak stoked the concerns after saying its energy giant Gazprom will reduce its gas supply to Ukraine in June if it receives no prepayment in May. 

Novak also warned Ukraine may not be able to store enough gas over summer to be transported to European countries in time for winter.

The week also saw increased M&A activity, with Heritage Oil (LON:HOIL) taken over by Qataris for £924mln, Premier Oil (LON:PMO) rebuffed the approaches of Ophir Energy (LON:OPHR), while Salamander Energy (LON:SMDR) put up the ‘for sale’ sign.

 

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