WTI and Brent Oil Rose Over 1% in the Morning but Gains Narrowed
Concerns Over Supply Disruptions if Putin Declares Martial Law
"Limited Impact from Russian Rebellion... China's Economy Seen as a Key Variable" Also Forecasted
International oil prices surged amid concerns that oil supply could be disrupted due to the instability in Russia caused by the armed rebellion of the Russian mercenary company Wagner.
On the 26th, in the international oil market, West Texas Intermediate (WTI) crude oil traded at around $70 per barrel, up about 1% intraday compared to the previous day. Although it had fallen nearly 4% last week, prices jumped in the market opened after the Russian armed rebellion was resolved within a day. UK Brent crude also recorded an intraday increase of 0.95%, reaching the $74 range.
Concerns over potential disruptions in energy supply due to instability within Russia, one of the world's largest oil producers, pushed oil prices higher.
Earlier, Yevgeny Prigozhin, the head of Wagner, led 25,000 mercenaries in a rebellion advancing toward Moscow. Through mediation by Belarusian President Alexander Lukashenko, Prigozhin agreed to withdraw within a day and go into exile in Belarus, but the rebellion heightened political instability within Russia.
Chris Iggo, Chief Investment Officer (CIO) at AXA Core Investments, stated, "We have confirmed attempts to avoid risks in the commodities sector in the initial market movements," adding, "Fear is spreading that Russia's turmoil could cause further disruption in the global energy market."
Helima Croft, an analyst at RBC Capital Markets, forecasted, "If President Putin declares martial law, workers may be unable to operate at major ports and energy facilities, potentially halting the export of millions of barrels of crude oil." She also explained, "I understand that the White House contacted major domestic and international oil companies yesterday to discuss emergency plans. This is a measure to ensure smooth supply if Russia's oil production is affected by this incident."
On the other hand, there are also views that the shock to the oil market caused by this incident will be limited.
Goldman Sachs predicted, "The impact may be limited because the spot fundamentals have not changed." In fact, in the afternoon, WTI and Brent crude had partially given back their morning gains.
Some analyses suggest that factors such as China's economic slowdown and central banks' interest rate hikes in various countries will be bigger variables for oil prices.
Tina Teng, a CMC Markets analyst, diagnosed, "China's economic growth is becoming a nightmare for the commodities market, especially in the oil and metals sectors."
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