Oil prices rose on Monday after a revolt by Russian mercenaries over the weekend raised concerns about political instability in Russia and the potential impact on oil supply from one of the world’s largest producers.
Brent crude futures were up 56 cents, or 0.8% at $74.41 a barrel by 0725 GMT. U.S. West Texas Intermediate crude (WTI) was up 44 cents, or 0.6%, at $69.44. Both benchmarks gained as much as 1.3% in early Asian trade.
A clash between Moscow and Russian mercenary group Wagner was averted on Saturday after the heavily armed mercenaries withdrew from the southern Russian city of Rostov under a deal that halted their rapid advance on the capital.
However, the challenge has raised questions about President Vladimir Putin’s grip on power and concerns about possible disruption of Russian oil supply.
Consultancy Rystad Energy said in a note late on Sunday that it did not expect to see a significant increase in oil prices as a result of the “short-lived event”.
“We do, however, believe that the geopolitical risk amid internal instability in Russia has increased,” Rystad added.
RBC Capital Markets analyst Helima Croft said there were concerns that Putin would declare martial law, preventing staff at loading ports and energy facilities from reporting for work, potentially halting millions of barrels of exports.
“It is our understanding that the White House was actively engaged yesterday in reaching out to key domestic and foreign producers about contingency planning to keep the market well supplied if the crisis impacted Russian output,” she said in a note on Sunday.
Goldman Sachs analysts said markets could price a moderately higher probability of domestic volatility in Russia leading to supply disruptions. However, the impact could be limited because spot fundamentals have not changed, the analysts added.
The number of oil and natural gas rigs operated by U.S. energy companies – an early indicator of future output – fell for an eighth week in a row for the first time since July 2020, a closely followed report showed on Friday.
Both Brent and WTI prices fell by about 3.6% last week on worries that further interest rate hikes by the U.S. Federal Reserve could sap oil demand at a time when China’s economic recovery has also disappointed investors after several months of softer than expected consumption, production and property market data.
“China’s economic growth has been a nightmare for commodity markets, particularly in oil and industrial metals,” CMC Markets analyst Tina Teng said in a note.
