Oil price blasts past $111 ahead of Opec meeting; Sberbank’s European arm closed – business live | Business

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The Brent crude oil price has blasted past $111 a barrel, its highest level since early July 2014, despite a decision by the United States to release, with its allies, about 60m barrels from their strategic reserves, in an attempt to stabilise global energy markets. US light crude has also jumped more than 6%, to $109.48 a barrel, its highest since September 2013.

The oil cartel Opec will hold a meeting today to discuss production plans. So far, the cartel confirmed that it remained committed to the Opec+ deal with Russia, and is not expected to change production plans despite the war in Ukraine.

The American oil giant Exxon Mobil announced yesterday that it would exit its Russian operations, including oil production fields, following similar moves by British companies BP and Shell, and Norway’s Equinor.

The Moscow stock exchange will remain shut for a third day, while the rouble is trading at 101.1 per dollar, after hitting a record high of 117 per dollar on Tuesday.

Stocks are in for another rough ride. On Wall Street, the S&P 500 and Nasdaq closed about 1.6% lower while the Dow Jones industrial average dropped nearly 1.8%. Asian markets are mostly lower: Japan’s Nikkei closed down 1.7% while Hong Kong’s Hang Seng lost 1.9%. European bourses are set for a lower open, after suffering declines in the last two days.

Last night, the European arm of Sberbank, Russia’s biggest lender, was closed by order of the European Central Bank.

The ECB had warned on Monday that the bank, based in Vienna, was failing or likely to fail because of a run on deposits. This prompted Austria’s Financial Market Authority to impose a moratorium on the bank’s activities, and just over an hour before the moratorium was due to expire last night, the FMA ordered the bank to close with immediate effect, citing the ECB order.

The US, EU, UK and other nations have responded to Russia’s invasion of Ukraine with a battery of sanctions including banning big Russian banks from Swift, the main global payments system. As a result, Sberbank Europe said on Monday that it had “experienced a significant outflow of customer deposits within a very short period of time”.

As sanctions against Russia widened, a number of British firms scrambled to dump Russian assets yesterday, including Legal & General, Abrdn and the state-run pension scheme Nest, which said they would try to sell holdings in Russian stocks. British Gas owner Centrica became the third big British energy firm to cut ties with Russia within a week, echoing BP and Shell by announcing the end of its gas supply agreement with Kremlin-controlled Gazprom.

The FTSE 100 commodities trader Glencore said it would review its business activities in Russia, including its equity stakes in two Russian-linked companies: state-controlled oil company Rosneft and FTSE 100 miner En+ Group.

Economists at ING said:

Given the war raging on the outskirts of western Europe, it is some surprise how little markets have responded in total, with negative days punctuated by dip-buying in some markets. This is especially true of the equity market, where 1.5% falls yesterday in the Nasdaq and S&P 500 leave both bourses some way above their lows for the year and with equity futures suggesting a more positive outlook.

It’s a different story in bond space. European bond yields were down sharply yesterday. two-year German bond yields fell more than 20bp and 10-year bund yields were down 21bp to -0.08%. US Treasury yields also fell heavily.

The Russia-Ukraine conflict will probably continue to dominate markets for the foreseeable future. The announcement yesterday that Russia will not pay coupons to foreign holders on its government debt should push investors further into safe-havens. Support for starting the EU membership process for Ukraine shows the unity of support for Ukraine from Western Europe but is unlikely to help calm tensions.

The Agenda

  • Opec meeting
  • 8.55am GMT: German unemployment for February
  • 10am GMT: Eurozone inflation for February (flash estimate)
  • 1.15pm GMT: US ADP jobs report for February
  • 3pm GMT: Bank of Canada interest rate decision
  • 3pm GMT: US Federal Reserve chair Jerome Powell testifies
  • 4pm GMT: Russia unemployment rate for January

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