Oil prices fall on Russia downgrade

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London - Oil prices retreated on Friday as traders booked profits in reaction to increased worries over Russia's faltering economy in response to its crisis situation with Ukraine, analysts said.

US benchmark, West Texas Intermediate for June delivery, fell 49 cents to $101.45 a barrel.

Brent North Sea crude for June dropped 43 cents to stand at $109.90 a barrel in London midday deals.

“It seems that Russia's downgrade from the credit rating S&P has dominated the equity and commodity markets today, prompting investors to lock in recent gains in the oil market,” said Myrto Sokou, senior research analyst at Sucden brokers.

Standard and Poor's on Friday downgraded its rating of Russia's ability to repay debt as alarm grew over the effects of the Ukraine crisis on the economy amid increased capital flight and slumping growth.

Russia's central bank also hiked interest rates by half a percentage point in a move aimed at curbing inflation which could also help limit capital flight and pressures on the ruble.

Kiev meanwhile on Friday accused Moscow of seeking to trigger a “third world war” as military tensions soared in east Ukraine and US President Barack Obama led a diplomatic charge against Russia.

Ukraine, a major conduit for Russian natural gas exports to Western Europe, is monitored closely by investors who are concerned also that a full-scale armed conflict will disrupt supplies and in turn risking a spike in energy prices.

“Renewed tensions over Ukraine between Russia and the West have triggered fresh worries about possible oil supplies issues in the region,” Sokou added.

The Soufan Group, a US-based consultancy that provides strategic security intelligence services to governments and multinational firms, said Russia accounts for 34 percent of natural gas supplies to the European Union.

Washington and its European allies supporting Ukraine's Western-friendly government have accused Russia of fomenting unrest in the country's east, but Moscow has denied the allegations.

Sapa-AFP


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