Oil prices experienced a slight increase on Monday, as concerns over political instability caused by an aborted revolt by Russian mercenaries were deemed not to pose an immediate threat to oil supply. Brent crude futures rose by 0.6%, or 47 cents, reaching $74.32 per barrel by just after midday GMT. U.S. West Texas Intermediate crude (WTI) also saw gains, rising by 0.5%, or 36 cents, to $69.52. Both benchmarks had initially surged by as much as 1.3% during early Asian trade.
The clash between Moscow and the Russian mercenary group Wagner was successfully averted on Saturday, as the heavily armed mercenaries withdrew from the southern Russian city of Rostov. A deal was reached to halt their rapid advance on the capital. While this development has raised questions about President Vladimir Putin’s control over power, there is limited concern about potential disruption to Russian oil supply.
According to Daniel Yergin, the vice chairman of S&P Global, the current impact on the market is predominantly driven by economics rather than geopolitics. Speaking at an industry event on Monday, Yergin emphasized that the geopolitical influence remains minimal.
Both Brent and WTI prices experienced a decline of approximately 3.6% last week, primarily due to worries regarding the potential negative impact of further interest rate hikes by the U.S. Federal Reserve on oil demand. These concerns were compounded by disappointing economic recovery in China, which has adversely affected commodity markets, particularly oil and industrial metals.
Analysts from Goldman Sachs have suggested that the markets might account for a moderately higher likelihood of domestic volatility in Russia leading to supply disruptions. However, they also noted that the impact would likely be limited since the spot fundamentals have not undergone significant changes.
In a report closely monitored by the industry, it was revealed that the number of oil and natural gas rigs operated by U.S. energy companies has fallen for eight consecutive weeks. This decline marks the first such occurrence since July 2020 and serves as an early indicator of future U.S. supply.
