Wagner Mercenary Group Mutiny Causes Fear of Fuel Supply Breakdown, Surging Oil Prices
The short-lived mutiny of the Wagner mercenary group on Saturday, June 24, caused fears of unease in the fuel supply, causing oil prices to rise.
Wagner Mercenary Group Mutiny Caused Oil Price Hike
As expected by various analysts, oil prices will increase due to the brief rebellion ordered by the Wagner mercenary group leader Yevgeny Prigozhin.
West Texas Intermediate futures climbed almost 1% to just below $70 a barrel in Asia trading. This followed after losing nearly 4% last week. On the other hand, Brent crude rose to 0.95%.
“We have seen in the early market moves that risk off is being played out in play in the commodity markets. The fear that any disruption in Russia could lead to further disruptions in the global energy market,” said Chris Iggo, AXA’s Chief Investment Officer for Core Investments.
Prigozhin and his troop geared toward Moscow on Saturday following their alleged domination of the southern city of Rostov. On Sunday, the embattled rebellion aborted its mission. According to Kremlin spokesman Dmitry Peskov, they dropped the criminal charges against Prigozhin after withdrawing his forces.
The mutiny elicited the biggest exigency to Russian President Vladimir Putin’s 23-year authority on power. Belarusian President Alexander Lukashenko acted as an intermediary for Putin. Reports are rife that the Russian president guaranteed that Prigozhin would manage to leave Russia for Belarus.
Will Putin Declare Martial Law?
The conflict between Prigozhin’s Wagner mercenary group and Moscow ended on Sunday under a deal that was never fully disclosed. However, it summoned questions regarding the Russian president’s grip on power and the probable interruption of the Russian oil supply.
According to Helima Croft, RBC Capital Markets analyst, there were implications that Putin might declare martial law. This could prevent workers from working on crucial loading ports and energy facilities and possibly cease millions of export barrels.
“It is our understanding that the White House was actively engaged yesterday in reaching out to key domestic and foreign producers about contingency planning to keep the market well supplied if the crisis impacted Russian output,” said Croft.
Markets may consider relatively higher feasibility that domestic volatility in Russia results in oil supply disruptions. Also, it could have a substantial adverse effect on future oil supply.
However, according to Goldman Sachs analysts, that repercussion may be restricted because spot fundamentals haven’t changed. Moreover, any impacts on financial risk view or to oil demand from accumulated uncertainty may offer offset.