DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Monday's session with tepid gains. The moves came as investors assessed the fallout from an attempted military insurrection led by Evgeny Prigozhin, head of Russia's Wagner mercenary group, on political stability and oil supplies in one of the world's largest nuclear countries and suppliers of energy to global markets.

Russia produces more than 10 million barrels per day (bpd) of oil or one in 10 barrels globally. Despite Western sanctions imposed on Moscow in the wake of its full-scale invasion of Ukraine in February 2022, Russia exports roughly 80% of produced volumes, with countries like India, China and Turkey emerging as major buyers of Russian oil. Disruptions to those flows on the global market could trigger Asian buyers of Russian oil to compete with Western nations for supplies from other producers.

Typically, geopolitical uncertainty in major oil-producing nations over the past 35 years -- ranging from civil unrest to coup attempts and changes of governments -- have, on average, added 8% to the price of oil in the immediate aftermath of the triggering event. In the days following Russia's invasion of its neighbor Ukraine, the international crude benchmark Brent contract surged more than 40% to $139 per barrel (bbl) on March 7, 2022. In this case, however, the market's reaction to the military insurrection has so far been muted, with investors apparently seeking more clarity on the events unfolding in Russia.

So far, there have been no reports or data points suggesting that Russian oil production or refining capacity has been affected by the disturbances. Speaking at a government meeting this afternoon, Russian Deputy Prime Minister Alexander Novak said the country's oil industry is operating normally and is preparing for the autumn and winter season, accumulating stocks, and carrying out necessary maintenance.

On Friday night, Wagner Chief Prigozhin released a video where he accused Russia's senior leadership of corruption and incompetence and questioned the rationale behind the invasion of Ukraine, a direct challenge to Russian President Vladimir Putin. The warlord, his voice seething with anger, said his men who numbered 25,000 would start moving from their base camps in eastern Ukraine toward Moscow. Stunned officials in Moscow scrambled to respond. Late on Friday, the Federal Security Service or FSB announced it had opened a criminal case against Prigozhin for "organizing an armed insurrection."

The focal point of the insurrection quickly became Rostov-on-Don in southern Russia, the army's Southern Command Center, which oversees the war in Ukraine. By midday on Saturday, the column was heading through Voronezh region hours away from Moscow. However, on Saturday night, Prigozhin halted his march and reports of a deal brokered by Belarussian President Alexander Lukashenko emerged.

As of Monday afternoon, the criminal case against Prigozhin has resumed and Putin gave a televised address to the nation, condemning the insurrection and its leader. Prigozhin, for his part, released an audio message on Monday defending the "march of justice" as a popular protest against the war in Ukraine and corrupt officials. Unofficial polls in Russia suggest Prigozhin's popularity is quickly soaring among the public. The situation remains fluid.

At settlement, NYMEX August West Texas Intermediate futures gained $0.21 to finish at $69.37 per bbl, and international crude benchmark Brent for August delivery advanced to $74.18 bbl. NYMEX July ULSD futures added $0.0317 to $2.4388 per gallon, and NYMEX July RBOB futures gained $0.0203 to $2.5375 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com