Oil markets shrug off Russian political unrest

June 27, 2023: On Monday, oil prices pared early gains, following a broader calm in monetary markets as investors watched warily to notice if there’ll be further fallout from a tried insurrection in Russia that could disrupt energy supplies from one of the largest oil producer nations of the world.

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

The militia group reportedly took control of the 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 about 0.8% at $69.74, 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 was trading about 0.8% higher at $74.47.

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 you would have seen a disruption which could have been anything from a couple of million barrels 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 roiled the markets badly,” he added.

On Saturday, Putin vowed to punish anyone 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 would be dropped, and he would be granted exile to Belarus, state-controlled outlet TASS reported.

“This shows unprecedented weakness for President Putin,” Eurasia Group president Ian Bremmer told on Monday.

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