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| Oil price spikes after Saudi drone attack causes biggest disruption ever – business live | Oil price spikes after Saudi drone attack causes biggest disruption ever – business live |
| (34 minutes later) | |
| Time for a quick recap. | |
| The oil price has surged after Saudi Arabia’s largest production facility was attacked on Saturday, sparking fears of conflict in the Middle East. | |
| Brent crude leapt by 20% in early trading to almost $72 per barrel - a record move, according to Bloomberg data. It then dipped back on hope that oil reserves will be released to avoid supply shortages. | |
| At 2pm UK time, crude was up almost 11% at $66.80 per barrel, a two-month high. | |
| The attack has removed more than five million barrels of oil from the market per day - or over half Saudi Arabia’s production -- making it the biggest knock to output ever. | |
| The US has blamed Iran, a claim which Tehran has dismissed. US energy secretary Rick Parry warned: | |
| “Make no mistake about it, this was a deliberate attack on the global economy and the global energy market.” | |
| Donald Trump moved quickly, tweeting overnight that he would unlock America’s strategic oil reserves. But he also raise the threat of military action, saying the US was ‘locked and loaded’ to respond to the perpetrator. | |
| Trump has also claimed that America doesn’t need Middle East oil, as it is a net energy exporter (or at least it should be next year...) | |
| UK foreign secretary Dominic Raab said the attack was a “very serious and outrageous attack”, but wouldn’t say whether Britain might join any military response. | |
| Oil experts fear that the oil price could keep rising, if Saudi Arabia can’t repair the damage quickly. Goldman Sachs have predicted crude could hit $75 per barrel - there’s even talk that we could see $100/barrel again. | |
| Economists have warned that the global economy could suffer -- more expensive oil means higher transport costs, leading to lower consumer spending. | |
| Ivan Petrella, associate professor of economics at Warwick Business School, says: | |
| “With the economy already showing clear signs of slowing down in most developed and developing countries, high oil prices could be the straw that breaks the camel’s back contributing to a recession. | |
| “Central banks around the world will be forced to rethink their current policy stance if this rise in oil prices is passed onto the public through inflation.” | |
| Brent crude oil spikes the most in history after Saudi attacks, last up 10%. https://t.co/qe3HXzOlh6 pic.twitter.com/uPKcs7KyUt | |
| Shares in oil producers have soared, with BP gaining 5.5% and Royal Dutch Shell now up 3.2%. | |
| European stock markets are in the red, though, as investors worry about the impact to growth. | |
| The Wall Street Journal has heard that Saudi Arabia is considering delaying the huge stock market flotation of its Aramco oil business. | The Wall Street Journal has heard that Saudi Arabia is considering delaying the huge stock market flotation of its Aramco oil business. |
| Last weekend’s attacks on Aramco’s facilities has introduced a new complexity to the proposed IPO, which has already proved painful. | Last weekend’s attacks on Aramco’s facilities has introduced a new complexity to the proposed IPO, which has already proved painful. |
| The WSJ says: | The WSJ says: |
| The attacks on Saudi Arabia’s oil facilities are testing new top officials at the Saudi Arabian Oil Co. and the kingdom’s national oil ministry, adding a fresh element of risk for international investors hoping to take part in Aramco’s initial public offering of stock. | The attacks on Saudi Arabia’s oil facilities are testing new top officials at the Saudi Arabian Oil Co. and the kingdom’s national oil ministry, adding a fresh element of risk for international investors hoping to take part in Aramco’s initial public offering of stock. |
| Saudi Aramco is gearing up for a two-part IPO, in which it hopes to first sell a sliver of itself to investors on the local Saudi exchange, and then list shares internationally, according to people familiar with the matter. The listing plans have long been dogged by questions over valuation and the venue for an international stock-market debut. | Saudi Aramco is gearing up for a two-part IPO, in which it hopes to first sell a sliver of itself to investors on the local Saudi exchange, and then list shares internationally, according to people familiar with the matter. The listing plans have long been dogged by questions over valuation and the venue for an international stock-market debut. |
| Saudi officials consider delaying Aramco IPO https://t.co/yalaWLDtgN via @WSJ | Saudi officials consider delaying Aramco IPO https://t.co/yalaWLDtgN via @WSJ |
| Donald Trump has made another attempt to calm the oil markets, declaring that the US economy doesn’t need supplies from the Middle East anyway. | Donald Trump has made another attempt to calm the oil markets, declaring that the US economy doesn’t need supplies from the Middle East anyway. |
| He’s tweeted that the US is now a ‘net energy exporter’, but will still help “allies” in the region (Saudi Arabia). | He’s tweeted that the US is now a ‘net energy exporter’, but will still help “allies” in the region (Saudi Arabia). |
| Because we have done so well with Energy over the last few years (thank you, Mr. President!), we are a net Energy Exporter, & now the Number One Energy Producer in the World. We don’t need Middle Eastern Oil & Gas, & in fact have very few tankers there, but will help our Allies! | Because we have done so well with Energy over the last few years (thank you, Mr. President!), we are a net Energy Exporter, & now the Number One Energy Producer in the World. We don’t need Middle Eastern Oil & Gas, & in fact have very few tankers there, but will help our Allies! |
| Is Trump correct? Not exactly... | Is Trump correct? Not exactly... |
| The IEA has predicted that America will become a net energy exporter in 2020, so it’s probably not there yet. The US did become a net gas exporter in 2017 (producing more than it consumed). | The IEA has predicted that America will become a net energy exporter in 2020, so it’s probably not there yet. The US did become a net gas exporter in 2017 (producing more than it consumed). |
| But yes, the US did overtake Saudi Arabia for oil production last week, partly thanks to the shale oil boom. | But yes, the US did overtake Saudi Arabia for oil production last week, partly thanks to the shale oil boom. |
| The US did not become the #1 energy producer because of Trump; it happened under Obama in 2012. US is not a net energy exporter; the EIA predicts it will happen by next year.US imported 30 million barrels per month from the Gulf as of June; that number has fallen under Trump. pic.twitter.com/L4gJ4z3UEO | The US did not become the #1 energy producer because of Trump; it happened under Obama in 2012. US is not a net energy exporter; the EIA predicts it will happen by next year.US imported 30 million barrels per month from the Gulf as of June; that number has fallen under Trump. pic.twitter.com/L4gJ4z3UEO |
| Roadside assistance group the RAC has warned petrol stations not to hike prices, on the back of the Saudi attacks. | Roadside assistance group the RAC has warned petrol stations not to hike prices, on the back of the Saudi attacks. |
| RAC fuel spokesman Simon Williams says retailers have only just begun passing on recent FALLS in the oil price -- so shouldn’t now race to put prices up again. | RAC fuel spokesman Simon Williams says retailers have only just begun passing on recent FALLS in the oil price -- so shouldn’t now race to put prices up again. |
| “There was an inevitable initial panic-driven surge in the oil price on Monday morning, but the situation then cooled. While the wholesale prices of both petrol and diesel look set to increase by 3p a litre, this doesn’t necessarily mean higher prices at the pumps because retailers only just began to pass on overdue wholesale price savings at the end of last week. | “There was an inevitable initial panic-driven surge in the oil price on Monday morning, but the situation then cooled. While the wholesale prices of both petrol and diesel look set to increase by 3p a litre, this doesn’t necessarily mean higher prices at the pumps because retailers only just began to pass on overdue wholesale price savings at the end of last week. |
| At that point the 128p forecourt price of petrol was 7p too high which means retailers should have a cushion to absorb the spike. If the barrel price remains high for a sustained period however, it could easily lead to several pence a litre being added to the average price of both fuels. Even after Friday’s 3p supermarket cut petrol is still averaging 127.77p and diesel 131.26p. | At that point the 128p forecourt price of petrol was 7p too high which means retailers should have a cushion to absorb the spike. If the barrel price remains high for a sustained period however, it could easily lead to several pence a litre being added to the average price of both fuels. Even after Friday’s 3p supermarket cut petrol is still averaging 127.77p and diesel 131.26p. |
| “We are hopeful the fact the US is releasing emergency oil stocks and that Saudi Arabia operates a global storage network will mean that drivers here in the UK will not be too harshly affected.” | “We are hopeful the fact the US is releasing emergency oil stocks and that Saudi Arabia operates a global storage network will mean that drivers here in the UK will not be too harshly affected.” |
| The US stock market is expected to dip when trading begins in 90 minutes. | The US stock market is expected to dip when trading begins in 90 minutes. |
| The Dow is down 100 point, or 0.4%, in the future market with airline stocks likely to fall sharply (as in Europe). | The Dow is down 100 point, or 0.4%, in the future market with airline stocks likely to fall sharply (as in Europe). |
| All about oil today. Crude spikes following attack on Saudi facilities. Futures lower, led by airline stocks. But oil stocks popping. | All about oil today. Crude spikes following attack on Saudi facilities. Futures lower, led by airline stocks. But oil stocks popping. |
| The Saudi attack is the biggest ever disruption to oil production, due to the importance of the Abqaiq site -- the largest of its type in the word. | The Saudi attack is the biggest ever disruption to oil production, due to the importance of the Abqaiq site -- the largest of its type in the word. |
| Abqaiq produces around 70% of Saudi Arabia’s output, which exceeds 9.6 million barrels per day. | Abqaiq produces around 70% of Saudi Arabia’s output, which exceeds 9.6 million barrels per day. |
| Saturday’s attack is thought to have removed 5.7m barrels from the market, even more than were knocked off by the Iranian revolution 40 years ago. | Saturday’s attack is thought to have removed 5.7m barrels from the market, even more than were knocked off by the Iranian revolution 40 years ago. |
| Having said that, the oil market was smaller in 1979, when protests cut Iranian production from 6m barrels per day to 1.5m. | Having said that, the oil market was smaller in 1979, when protests cut Iranian production from 6m barrels per day to 1.5m. |
| And the true impact of the Saudi attacks will depend on how quickly the facilities are prepared. | And the true impact of the Saudi attacks will depend on how quickly the facilities are prepared. |
| Geoffrey Smith, Director of Oil & Shipping Research at Refinitiv, comments: | Geoffrey Smith, Director of Oil & Shipping Research at Refinitiv, comments: |
| “We are seeing oil loadings out of Saudi resume and are increasing to handle the shortfall over the weekend. The question is for how long Saudi Arabia can maintain export levels and quality while the damage is fixed. | “We are seeing oil loadings out of Saudi resume and are increasing to handle the shortfall over the weekend. The question is for how long Saudi Arabia can maintain export levels and quality while the damage is fixed. |
| The most likely effects are to be felt from November onwards as storage might start hitting critical levels if the processing facility has not been repaired. | The most likely effects are to be felt from November onwards as storage might start hitting critical levels if the processing facility has not been repaired. |
| A spokesman for UK prime minister Boris Johnson has condemned the Saudi attacks as a “wanton violation” of international law, at today’s briefing with journalists in Westminster. | A spokesman for UK prime minister Boris Johnson has condemned the Saudi attacks as a “wanton violation” of international law, at today’s briefing with journalists in Westminster. |
| Q: Could the UK release some of its oil reserves? | Q: Could the UK release some of its oil reserves? |
| The UK business department is monitoring the situation closely, and working with the International Energy Agency*, Johnson’s spokesman explained. | The UK business department is monitoring the situation closely, and working with the International Energy Agency*, Johnson’s spokesman explained. |
| * - the IEA would organise any co-ordinated international response | * - the IEA would organise any co-ordinated international response |
| PM's spokesman condemns #Aramco attack as "wanton violation of international law". Business & energy dept (BEIS) closely monitoring situation re oil reserves | PM's spokesman condemns #Aramco attack as "wanton violation of international law". Business & energy dept (BEIS) closely monitoring situation re oil reserves |
| Sir Malcolm Rifkind on Sky now saying "all roads lead to Iran". Downing St more circumspect, saying the picture is "not yet clear" and will wait "until we have the full facts" to judge | Sir Malcolm Rifkind on Sky now saying "all roads lead to Iran". Downing St more circumspect, saying the picture is "not yet clear" and will wait "until we have the full facts" to judge |
| The US secretary of energy, Rick Perry, has condemned Iran for attacking Saudi Arabia’s oil facilities (which Tehran has denied), but also insisted the oil market is ‘robust’. | The US secretary of energy, Rick Perry, has condemned Iran for attacking Saudi Arabia’s oil facilities (which Tehran has denied), but also insisted the oil market is ‘robust’. |
| Perry was speaking at the International Atomic Energy Agency’s general conference in Vienna today. | Perry was speaking at the International Atomic Energy Agency’s general conference in Vienna today. |
| He said that the attack was “unacceptable” and that Iran “must be held responsible”, adding: | He said that the attack was “unacceptable” and that Iran “must be held responsible”, adding: |
| “Make no mistake about it, this was a deliberate attack on the global economy and the global energy market.” | “Make no mistake about it, this was a deliberate attack on the global economy and the global energy market.” |
| (thanks to Associated Press for the quote). | (thanks to Associated Press for the quote). |
| Perry added that the market was “resilient”, and predicted it would “respond positively” to the attack. | Perry added that the market was “resilient”, and predicted it would “respond positively” to the attack. |
| Here’s a Q&A explaining how the Saudi oil attacks took place, why it has geopolitical consequences, and what could happen next: | Here’s a Q&A explaining how the Saudi oil attacks took place, why it has geopolitical consequences, and what could happen next: |
| Everything you need to know about the Saudi Arabia oil attacks | Everything you need to know about the Saudi Arabia oil attacks |
| Amrita Sen, analyst at Energy Aspects, says consumers will see the impact of today’s oil price spike in a few weeks time. | Amrita Sen, analyst at Energy Aspects, says consumers will see the impact of today’s oil price spike in a few weeks time. |
| Speaking on Sky News, she also predicts that the International Energy Agency could organise a “co-ordinated release of oil” if Saudi production remains disrupted for weeks. | Speaking on Sky News, she also predicts that the International Energy Agency could organise a “co-ordinated release of oil” if Saudi production remains disrupted for weeks. |
| That would protect consumers from a price spike. | That would protect consumers from a price spike. |
| IEA consumer countries are required to hold emergency oil stocks equivalent to 90 days’ worth of net imports, so there is some firepower to deploy. | IEA consumer countries are required to hold emergency oil stocks equivalent to 90 days’ worth of net imports, so there is some firepower to deploy. |