Shares in FTSE 100 oil giants took a tumble on Wednesday morning as President Donald Trump ramped up the pressure on Venezuela to hand over oil.
Shell sunk two per cent as markets opened to 2,692p whilst BP was down 2.5 per cent to 420.83p. This weighed on the wider FTSE 100, dragging the index to a 0.3 per cent slump and ending 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 City AM.
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.
Bejing has urged the US to “stop toppling” the Venezuelan government with the top diplomat of China accusing the White House as behaving like a “world judge”.
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.