Brent gains amid private mercenary group’s dispute with the Russian state

The front-month ICE Brent contract has gained $0.62/bbl on the day, to $74.46/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures drew support after a dispute in Russia prompted oil markets to worry about a potential supply crunch.

Hostilities between Russia’s private mercenary group Wagner and Moscow grew over the weekend. A clash between the two entities was avoided on Saturday after the mercenaries halted their advance towards Moscow under a deal with the government, Reuters reports. However, the dispute has raised concerns about political instability in Russia.

Analysts at ANZ said in a note that this attempt of a coup by Wagner is “likely to lead to a risk premium being applied to the oil price amid the risk of further civil unrest.”

On the demand side, the summer driving season is expected to drive demand growth in the US. This could push oil prices further up.

Downward pressure:

On the flip side, concerns about China’s economic recovery have dented sentiments of oil 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.

Oil prices came under pressure after the US Federal Reserve’s chairman hinted at another interest rate hike by the end of the year.

The oil market has been “very confident” that despite strong growth in demand and a supply crunch due to OPEC+ production cuts, global central banks would be able to slow down the economy, said Phil Flynn, Price Futures Group’s senior market analyst. This could allow "the market to ignore the possibility of a looming supply deficit."

By Aparupa Mazumder 

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