Oil markets shrug off Russian political turmoil

By Noah Browning

LONDON (Reuters) -Oil prices firmed slightly on Monday, with political instability from an aborted revolt by Russian mercenaries over the weekend viewed by the market as not posing an immediate threat to oil supply from one of the world’s largest producers.

Brent crude futures were up 47 cents, or 0.6%, at $74.32 a barrel by 1217 GMT. U.S. West Texas Intermediate crude (WTI) gained 36 cents, or 0.5%, to $69.52. 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 some concern about possible disruption of Russian oil supply.

“There’s not much geopolitical impact on the market now. It is dominated by economics, not geopolitics,” Daniel Yergin, vice chairman of S&P Global (NYSE:SPGI), said on the sidelines of an industry event on Monday.

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.

“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.

Goldman Sachs (NYSE:GS) analysts said markets could price in a moderately higher probability of domestic volatility in Russia leading to supply disruptions, adding that the impact could be limited because spot fundamentals have not changed.

In an early indicator of future U.S. supply, the number of oil and natural gas rigs operated by U.S. energy companies fell for an eighth week in a row for the first time since July 2020, a closely followed report showed on Friday.