Oil prices are likely to become volatile amid the fallout from the alleged killing of Wagner boss Yevgeny Prigozhin in a plane crash that is reported to be on the orders of Russian President, Vladimir Putin.

This comes as Russian aviation authorities say Prigozhin, the leader of the infamous mercenary group who was denounced as a traitor by Putin following an attempted coup 60 days ago, was among 10 people killed in a plane crash near Moscow on Wednesday.

“Some reports say that Wagner mercenaries can be expected to take revenge on Putin and Defence Minister Shoigu for the death of their leader,” says Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory. “Other reports say that Prigozhin, in fact, avoided the killing and will be even more on the war path with Putin.”

Either way, it appears the situation is becoming even more fragile and vulnerable for Vladimir Putin, at least in the short term. 

“Some analysts are even warning that this situation could ultimately lead to his downfall and potentially lead to civil war and/or the possible fragmentation of Russia,” says Green. “A weakening of Vladimir Putin’s stronghold on power could potentially have an impact, albeit not directly, on oil prices as his influence is closely tied to Russia’s oil production and its geopolitical positioning.” 

Any power struggle or political instability in Russia will introduce uncertainty to global oil markets and drive oil price volatility.

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The deVere CEO says oil prices are “particularly vulnerable” right now to the Prigozhin news as the market is “concerned about the pace of China’s economic growth” and as investors monitor the Jackson Hole Federal Reserve meeting which starts Thursday, which “could provide more hints as to whether interest rates will remain higher for longer.”

The situation is looking precarious on many levels for Putin, thereby contributing to short-term turbulence in the price of oil. Oil prices have a substantial influence on wider financial markets due to their far-reaching impact on economies, industries, and consumer behaviours.

Read here for Investment Monitor‘s recent outlook for 2023’s global oil prices.