Brent rises after domestic dispute in Russia causes supply concerns

The front-month ICE Brent contract has increased by $0.85/bbl on the day from Friday, to $73.84/bbl at 09.00 GMT.

PHOTO: Oil barrels kept against the Russian flag. Getty Images

Upward pressure:

Brent futures drew some upward support after Russia’s private mercenary group Wagner openly challenged the Russian state over the weekend, raising concerns about crude oil supply from Russia.

Domestic volatility between Moscow and Wagner’s mercenaries could impact oil output in the OPEC-ally country as concerns that President Vladimir Putin could declare martial law in the country surfaced.

Brent prices are also supported by concerns over supply shortage as output cuts pledged by OPEC+ nations earlier this year will further limit global crude oil supply from July.

Downward pressure:

Monetary policies and recent interest rate hikes executed by different European nations including the UK, Switzerland, and Norway, has put a downward pressure on Brent.

“Higher interest rates have negatively impacted OECD GDP growth, keeping oil's primary driver well below potential,” said SPI Asset Management’s managing partner Stephen Innes.

A higher interest rate could reduce consumer spending and drive oil demand down.

On the other hand, the US Federal Reserve’s (Fed) chairman Jerome Powell at a recent congressional testimony hinted at further rate hikes in the US by the end of this year.

“The oil market will remain heavy until European inflation eases,” commented ​OANDA’S senior market analyst Ed Moya. “Brent crude could make a run towards the $70 region but should rebound once we finally see significant easing come from Beijing,” he further added in a note.

By Aparupa Mazumder 

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