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AP and Reuters

Oil climbs, markets on edge over darkening growth outlook

2023-06-25T23:28:42Z

An investor sits in front of a board showing stock information at a brokerage office in Beijing, China, December 7, 2018. REUTERS/Thomas Peter/File Photo

Oil nudged higher in early trade on Monday as an abortive weekend mutiny by Russian mercenaries raised questions about crude supply, though other financial markets started steadily with investors unsure of any further immediate implications.

Brent crude futures rose 1.3% to $74.78 a barrel and U.S. crude was up by the same margin to $70, recouping a little of losses made last week. S&P 500 futures were 0.2% higher and currency markets were broadly steady.

Russian mercenaries made a short-lived rebellion on Saturday, seizing the southern city of Rostov and advancing on Moscow demanding the removal of Russian military commanders in charge of the war in Ukraine.

The private Wagner army then withdrew after striking a deal guaranteeing their safety and the exile of their leader, Yevgeny Prigozhin, to Belarus. The consequences for the Ukraine war were not clear, though the challenge to Russian President Vladimir Putin’s authority was the starkest in decades of his leadership.

“Geopolitical risk amid internal instability in Russia has increased,” said Rystad Energy analysts Jorge Leon. “As such, we are likely to see a marginal uptick in oil prices in the coming days, if the situation does not deteriorate.”

U.S. Secretary of State Antony Blinken said the turmoil in Russia could take months to play out, while Italy’s foreign minister said it had shattered the “myth” of Russian unity.

Elsewhere markets were already on edge about a darkening growth outlook, as China’s post-pandemic recovery stalls and global interest rates remain high, and traders were unwilling to take any new positions on the basis of Russian events.

The risk-sensitive Australian dollar was steady at $0.6682. The euro nursed last week’s modest drop at $1.0906 and sterling held at $1.2722.

“I don’t think the market can get its head around working out if there are implications,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

“People may think that ultimately Putin’s grip on power is weakened here. Maybe the Ukrainians may be emboldened to be upping their counteroffensives,” he said, but without obvious progress traders in Asia would be focused on China.

China returns from holidays with the yuan having dropped sharply in offshore trade, leaving investors looking to the morning’s fix of the onshore trading band for signs of the central bank’s level of comfort with the slide.

The offshore yuan last traded at 7.21 per dollar.

The Japanese yen , which has been on a slide as global interest rate expectations rise and Japan’s central bank stays steadyfastly dovish, steadied at 143.57.

Japan’s top currency diplomat Masato Kanda said on Monday authorities will respond to any excessive moves and did not rule out intervening as happened last year.