Scotland's position on oilfield project 'disappointing' says Mutch

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Analysts have offered dire warnings about potential supply disruptions as political tensions between Russia and Ukraine intensify. Phil Flynn, senior market analyst at The Price Futures Group said the potential for disruption was high because of Russia’s key role as an oil and energy producer particularly for the European market.

He said: “From an energy standpoint, this could be a seismic event.”

Mr Flynn also argued that in a rush to get off fossil fuels European countries had “become more dependent on Russia as a major source for their energy.”

The comments come as West Texas Intermediate and March Brent reported the price of oil had increased to $83.82 and $86.06 per barrel respectively.

The price of oil is directly linked to the cost of wholesale fuel, meaning motorists will be reaching deeper into their pockets as petrol prices could rise

Russia has begun moving tanks and other military equipment from Far Eastern bases towards Ukraine, according to the Wall Street Journal on Friday.

In addition, a cyber attack on Ukraine sparked further war fears as a number of Ukrainian government websites were temporarily unavailable.

Ukrainian Foreign Ministry spokesman, Oleg Nikolenko, told Associated Press that while it was too early to identify a culprit, he had little doubt Moscow was involved.

He said: “There is a long record of Russian cyber assaults against Ukraine in the past.” 

Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch that tensions in the region could cause an oil price premium.

He said: “Whereas the Russian-Ukrainian crisis directly affects the regional natural gas prices, crude oil prices are generally aloof, since little Russian oil transits through Ukraine.

“Still, the possibility of an armed conflict is a serious development, and has wide geopolitical ramifications, thereby boosting oil price premiums.”

However, Raj pointed out that the oil market had been boosted by optimism from EU countries such as Spain in relation to the Coronavirus pandemic. 

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He said they are starting to “perceive COVID as an endemic”, implying they are “learning to live with COVID rather than impose sporadic lockdowns.”

However, the industry is still concerned about the possibility of global political instability affecting production and oil prices.

Robbie Fraser, global research & analytics manager at Schneider Electric identified Libya, Iran and Kazakhstan as problem areas in a note.

He said: “Geopolitics and unplanned disruptions have added support to prices at least for the near-term.

“Unrest in countries like Libya and Kazakhstan caused some strong, but likely temporary, production losses in recent weeks, while the chances of a breakthrough around a renewed Iranian nuclear deal have again faded.”

Political instability between Russia and Ukraine could not only destabilise the region but also push up the price of oil as well as affecting production.

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