On Monday, oil prices spiked after the revolt by Russian mercenaries. The revolt raised worries about the political instability in Russia and its potential impact on the oil supply from one of the world’s biggest producers.
Both of the benchmarks, U.S. West Texas Intermediate crude futures and Brent, gained 0.4% on Monday, and in early Asian trade they climbed for 1.3%, after which the gains were pared back. Brent and WTI were up by 27 cents and 28 cents, respectively.
The clash was averted on Saturday between Moscow and the Russian mercenary group Wagner; the mercenaries’ quick advance on the capital was stopped by a deal, as the capital saw them withdraw from Rostov in southern Russia.
The concerns are raised by many questions about the challenges, including the grip on power of President Vladimir Putin and the possible disruption of the Russian oil supply.
The significant increase in oil prices because of the “short-lived event”, was not expected by the Consultancy Rystad Energy, as they mentioned in their note on Sunday.
Rystand said, “We do, however, believe that the geopolitical risk amid internal instability in Russia has increased.”
There were concerns that martial law might get imposed by the Puting, banning employees from reporting to major loading ports and energy facilities, which could lead to blocking millions of barrels of exports.
In a note on Sunday, She added that “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.”
According to Goldman Sachs analysts, there may be an increase in the price as domestic Russian turbulence causes supply interruptions. The impact may be marginal as the market fundamentals have not altered, the analysts said.
There were declines in Brent and WTI, which dipped by 3.6% last week. It dipped because of concerns about further interest rate increases by the U.S. Federal Reserve. This might reduce the demand for oil at a time when investors have also been let down by China’s economic recovery as a result of several months of weaker than anticipated consumption, production, and real estate market data.
CMC Markets analyst Tina Teng said in a note that “China’s economic growth has been a nightmare for commodity markets, particularly in oil and industrial metals.”
