A short-lived mutiny by Russia’s Wagner Group that was seen as a threat to President Vladimir Putin’s grip on power saw U.S. energy officials scramble to back up global supplies of crude oil, according to a top Wall Street commodities analyst.
“It is our understanding that the White House was actively engaged [Saturday] 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 Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sunday note to clients.
A significant worry was that Putin might declare martial law, preventing workers from showing up at major loading ports and energy facilities, potentially halting the export of millions of barrels of oil, she said. Croft noted that key energy officials, notably Amos Hochstein, now President Joe Biden’s senior adviser for energy and infrastructure, served in the Obama administration when unrest in Libya closed down the Sirte Basin export facilities. The incident led to a spike in crude prices during the Arab Spring.
“The experience of being caught off guard by the Libyan export disruption seemingly guided the pre-emptive outreach and planning on Saturday. There was a concurrent concern that critical pipelines could either be directly targeted or inadvertently damaged if the insurrection turned into a full-scale war,” Croft said.
The White House didn’t reply to a request for comment.
The rebellion saw the mercenary paramilitary force, led by Yevgeny Prigozhin late Friday, take over Russia’s southern military headquarters in Rostov-on-Don.
The group marched largely unchallenged toward Moscow, halting their advance around 120 miles short of the capital of Moscow Saturday before Prigozhin abruptly stood down in a deal that would exile him to Belarus, with charges against him of leading an armed rebellion dropped.
Oil futures and global financial markets took the chaos largely in stride. The U.S. crude benchmark
CL00,
+0.65%
ended the day up just 21 cents, or 0.3%, at $69.37 a barrel on the New York Mercantile Exchange, while global benchmark Brent crude
BRNQ23,
+0.30%
gained 33 cents, or 0.5%, to settle at $74.18 a barrel on ICE Futures Europe.
Read: Russia’s Putin survives short-lived Wagner Group mutiny. Here’s what that means for oil.
U.S. stocks were mixed, with the Dow Jones Industrial Average
DJIA,
+0.04%
up 66 points, or 0.2%, while the S&P 500
SPX,
-0.36%
shed 0.1%.
But the episode is seen potentially weakening Putin’s hold on power and raising the prospect of further rounds of internal strife with the potential to upend global commodity and financial markets, analysts said.
See: What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened
Croft also disputed speculation that the end of the Putin regime could mean the rollback of Russian energy sanctions and a return of Russian exports to Europe.
“We continue to contend that sanctions will remain in place while Putin remains in power. Nonetheless, a figure like Prigozhin would not be a welcomed replacement, given the human rights violations and criminality associated with Wagner Group activities,” she wrote. “Indeed, the idea of a Prigozhin figure with nuclear weapons would likely be viewed as a terrifying prospect by many of Ukraine’s key Western backers.”
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