British stocks rise as energy stocks soar; Shell discontinues purchases of Russian oil

The FTSE 100 in London edged higher on Tuesday, aided by strong gains in energy stocks as oil prices rose after Britain and the United States announced bans on Russian crude imports, while insurer and asset manager M&G was the top index gainer thanks to a share buyback program. The blue-chip FTSE 100 rose 0.1 percent, with Shell and BP leading the way.

According to Business Minister Kwasi Kwarteng, Britain will phase out Russian imports of oil and oil products by the end of 2022. Separately, the world’s largest oil consumer, the United States, announced a ban on Russian oil imports. Shell stopped buying Russian crude and announced that it would phase out its involvement in all Russian hydrocarbons, from oil to natural gas, over Ukraine, becoming one of the first major Western oil companies to abandon Russia entirely.

“As concerns about oil supply continue,” said Susannah Streeter, senior analyst at Hargreaves Lansdown, “the elevated price of crude should keep Shell on the path of slicing big chunks off net debt and funding capital expenditure in new gas field expansion and low carbon alternatives like hydrogen.” The FTSE 100 has dropped 5.7 percent this year, the least among developed markets in Europe and the United States, owing primarily to strong oil stocks. However, the rise in energy prices has raised concerns about inflation and economic growth.

Energy stocks gained 3.5 percent a day after posting their best session since January 2021, and it is the top gaining UK sub-index this year, up 21.7 percent. In the United Kingdom, the Resolution Foundation think tank predicted that the conflict would cause wider inflation, slashing 4% from the real level of typical household incomes over the next year, the steepest drop in nearly a half-century. The domestically focused mid-cap index rose 0.3 percent, regaining ground from the previous session’s lows, which were last seen in November 2020.

“It’s probably just a rebound because we haven’t seen another devastating headline in a short period of time, allowing for some kind of minor relief rally,” said Craig Erlam, senior market analyst at Oanda. M&G gained 15.0 percent among individual stocks after the insurer and asset manager announced a 500 million pound ($654.30 million) share buyback programme. Greggs, the British baker and fast food chain, fell 3.4 percent after warning that rising raw material, energy, and labour costs would limit any material profit growth in 2022.