Oil markets breathe a ‘sigh of relief’ after Russian mutiny was aborted

Russia’s President Vladimir Putin issues a statement in Moscow on June 24, 2023 as Wagner fighters stage rebellion in the biggest threat to Putin’s quarter-century grip on power.
Pavel Bednyakov | AFP | Getty Images

Oil prices pared early gains on Monday, tracking a broader calm in financial markets as investors watched warily to see if there’ll be further fallout from an attempted insurrection in Russia that could disrupt energy supplies from one of the world’s largest oil producer nations.

Mercenaries led by Yevgeny Prigozhin, leader of the Wagner group of private militia, marched toward Moscow on Saturday, in what was seen as the biggest threat to Vladimir Putin’s 23-year grip on power.

The militia group reportedly took control of southern city of Rostov-on-Don — where several major oil and gas pipelines intersect — before the armed rebellion was abruptly called off, less than 24 hours after it began.

“Collectively the world would have breathed a sigh of relief at least on the oil market side that the disruption in the Russian state did not go through the worst that people feared,” Alok Sinha, Standard Chartered global head of oil & gas and chemicals, told CNBC Monday.

West Texas Intermediate futures were up 0.3% at $69.42, after initially rising as much as 1.3% to just below $70 a barrel earlier Monday, followed by last week’s almost 4% decline. Brent crude were trading about 0.4% higher at $74.20.

Stock Chart IconStock chart icon

hide content
West Texas Intermediate

The MSCI Asia ex-Japan, a gauge of stocks trading in Asia outside of Japan, lingered at a three-week low, while currencies typically seen as safe havens were mixed.

“If it had led to disruption in oil supplies from the Russian state, I think what you would have seen is a disruption which could have been anything from a couple of million barrels all the way up to 3.5-4 million barrels,” said Standard Chartered’s Sinha.

“Now that kind of disruption even if it’s short term could have really roiled the markets really badly,” he added.

On Saturday, Putin vowed to punish anyone who was involved in the “armed rebellion,” accusing the group of treason and betrayal.

But when Prigozhin’s forces eventually turned back, Kremlin spokesman Dmitry Peskov said the criminal charges against the Wagner leader will be dropped and that he will be granted exile to Belarus, state-controlled outlet TASS reported.

“Obviously this does show a level of unprecedented weakness for President Putin,” Eurasia Group president Ian Bremmer told CNBC Monday.

“But at the same time, while Putin was unprecedently tested, there was not a single high-level defection from the Russian military, from the Russian government or among the Russian oligarchs,” he added. “Anyone that believes that Putin is suddenly is on the brink of leaving power, also needs to recognize that’s not where we are.”

— CNBC’s Audrey Wan contributed to this report.