Oil prices rose on Monday as investors balanced concerns about global demand growth against upcoming supply disruptions that could be exacerbated by political instability in Russia.
Brent crude futures rose by 33 cents or 0.5 per cent to settle at $74.18 a barrel, while the US West Texas Intermediate (WTI) futures increased by 21 cents or 0.3 per cent to $69.37 a barrel.
Heavily armed Russian mercenaries withdrew from the southern Russian city of Rostov under a deal that halted their rapid advance on Moscow on Saturday.
Despite the change of course, the move raised questions about President Vladimir Putin’s grip on power.
Ending their short-lived mutiny, fighters of the Wagner group began heading back to their bases late on Saturday in return for guarantees of their safety.
Their commander, Yevgeny Prigozhin, will move to Belarus under the deal mediated by Belarusian President Alexander Lukashenko.
Market analysts warned that Russian political instability could worsen supply shortages in the months ahead due to Saudi Arabia’s pledge to cut output from July, the risk of lower US production and an imminent end to U.S. strategic reserve releases.
Both Brent and WTI prices fell by more than 3 per cent last week on worries that further interest rate hikes by the US Federal Reserve could sap oil demand at a time when China’s economic recovery has also disappointed investors.
Saudi Arabia pledged to make a deep cut to its output in July, on top of a broader deal by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) to limit supply into 2024. It raised the prices of its Arab Light crude to Asian buyers in July to a six-month high.
As a result, Asian refiners are likely to take less oil from Saudi Arabia for July and buy more spot cargoes, such as those from the United Arab Emirates.
Saudi Arabia and other OPEC members have repeatedly said that they are not targeting a specific price for oil, yet some OPEC observers said that the organisation needed higher oil prices because of accelerating inflation.
Crude oil demand is set to rise to 110 million barrels daily by 2045, which would be a 23 per cent increase from current levels, according to the Secretary General of OPEC, Mr Haitham al Ghais.
The forecast comes a week after the International Energy Agency (IEA) predicted oil demand growth will slow in the next few years, shrinking from 2.4 million barrels per day this year to 400,000 barrels daily in 2028, with peak demand in sight.