Russian coup attempt may push crude prices 8% higher if political turmoil spills over

Although the first coup attempt in Russia in three decades may have been abandoned, the resulting political instability could potentially lead to a spike in oil prices in the coming days, the Norway-based energy research and business intelligence firm Rystad Energy has warned after analysing historical data. 

“In the last 35 years, geopolitical events in big oil producers have increased oil prices by an average of 8 per cent in the five days after the start of the triggering event,” Rystad Energy’s Vice President Jorge León said in a statement shared with Business Today. 

Pointing out that such geopolitical uncertainty caused by events such as civil unrest, coup attempts, armed conflicts and change of governments have not been uncommon in the oil-producing nations in the past few decades, León said these have immediately added significant upside pressure to oil prices, even though there was no immediate change in the flow of oil supplies. 

To better illustrate his analysis, he cited the 1990 invasion of Kuwait by Iraq and the ensuing Gulf War, the 1992 coups in both Algeria and Venezuela, the 2002 invasion of Iraq by the US, civil wars in Libya in 2011 and 2014, drone attack in Saudi Arabia in 2019 and more recently the outbreak of war between Russia and Ukraine in early 2022 that had all resulted in an increase in oil prices. 

On June 24, convoys of Russian private military company (PMC) Wagner led by their leader Yevgeny Prigozhin crossed from Ukraine into Russian territory and seized military facilities in the southern Russian cities of Rostov-on-Don and Voronezh, sparking fears of a coup attempt against President Vladimir Putin. Halting their advance barely 200 km from Moscow, Prigozhin announced the group had abandoned its insurrection against the Russian government and announced plans to move to neighbouring Belarus to purportedly avoid prosecution. 

León said that since the attempted weekend coup in Russia was short lived, any significant increase in oil prices was unlikely. 

“We do, however, believe that the geopolitical risk amid internal instability in Russia has increased. As such, we are likely to see a marginal uptick in oil prices in the coming days, if the situation does not deteriorate further,” he surmised. 

León further added that it would be pertinent to keep track of any geopolitical developments in Russia in the coming hours. Any possible spillover of the political instability into the oil-producing countries of the erstwhile USSR such as Kazakhstan and Azerbaijan could add a further risk premium to oil prices. 

Brent crude futures were up 33 cents, or 0.45%, at $74.34 a barrel at 1641 IST, while the US West Texas Intermediate crude (WTI) was up 26 cents, or 0.38%, at $69.42 a barrel.