4:06 PM ET, June 26, 2023
The United States has reached out to oil producers at home and abroad as chaos spreads in Russia, an official said
By Matt Egan and Kevin Liptak from CNN
As Russia faced a shocking rebellion, White House officials were reaching out to foreign and domestic oil producers about the dangerous situation unfolding in one of the world’s major oil powers, a US official told CNN Monday.
Talks with oil producers have been described as precautionary in nature. They occurred while other U.S. officials were searching for more information about what was really going on inside Russia and trying to assess the potential consequences, including for the global economy.
Wagner’s mercenary chief Yevgeny Prigozhin He stirred international concern over the weekend by seizing a Russian city and threatening to march all the way to Moscow.
On Monday, US President Joe Biden said he had instructed members of his national security team to “prepare for a range of scenarios” where a potential insurrection was underway.
Representatives from the White House, Energy Department and Treasury Department did not comment on contacts with oil producers.
The apocalyptic images raised the specter of a nightmare scenario for the US economy in which instability derails Russian oil flows, sending gasoline prices soaring just as inflation has subsided.
Russia is important because it is the world’s largest oil exporter. “Period,” said Bob McNally, a former senior energy official to President George W. Bush. Revolutions in the oil majors are a huge deal. I’m sure the focus of minds in the White House over the weekend.”
McNally, president of consulting firm Rapidan Energy Group, said the chaos in Russia could theoretically halt oil production or hamper export facilities. Remember how Russia’s invasion of Ukraine early last year sent shock waves through energy markets.
“When we thought we were going to lose Russia – just think about it – it got gasoline up to $5 a gallon,” McNally said.
Investors breathed a sigh of relief as Prigozhin’s rebellion proved short-lived, as Wagner’s chief turned around on his march towards Moscow. after Climbing briefly on Russia newsUS oil prices closed up just 0.3% on Monday, at $69.37 a barrel.
Helima Croft, a former CIA analyst who now heads global commodity strategy at RBC Capital Markets, told clients Sunday that she understands the White House was “actively engaged” on Saturday in “communication with major foreign and domestic producers on contingency planning to maintain supply.” The market is good if the crisis affects Russian production.
Croft said the “big concern” was that Putin would declare martial law and prevent “workers from coming to major loading ports and energy facilities” and thus potentially stop “millions of barrels of exports”.
The former CIA analyst recalled how deep turmoil in Libya had led to massive production outages in that member state of the Organization of the Petroleum Exporting Countries (OPEC) in the past decade, sending oil prices soaring. “There was a simultaneous concern that vital pipelines could be directly targeted or inadvertently damaged if the insurgency degenerated into full-scale war,” Croft wrote in a note.
It’s standard operating procedure for US energy officials to gather intelligence during crises like the one that erupted in Russia, McNally said. He noted, “Checking their industry sources while the world’s largest exporter is experiencing appalling instability is good business practice.”
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