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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
(32 minutes later)
Brent crude is pushing higher.... now up 11.5% today at $67.03 per barrel.
Fiona Cincotta, senior market analyst at City Index, says traders are focusing on how quickly supply can return to normal at the Saudi Aramco plant.
Geopolitical risk in the Middle East is nothing new. However, what we are seeing is a physical disruption to supply, as the attacks over the weekend cut half the county’s oil production. This equates to a disruption on as much as 5% of global oil production.
We can expect oil prices to remain elevated whilst production is disrupted, some reports suggest that this could be weeks. As supply returns, we can expect the price of oil to start declining back towards $62, should geopolitical risks ease as well. However, with the US “locked and loaded” awaiting signs from Saudi Arabia that Iran was involved, tensions in the middle east could get worse before they get better. Under these circumstances the price of oil could remain elevated for some time yet.
Data provider Refinitiv has spotted that Saudi Arabia has been scrambling supertankers to export oil, to cover the shortfall from the Abqaiq attacks.
It says:
Tracking data shows at least 8 VLCC’s [very large crude carriers] that are currently loading in Juaymah and Ras Tanura, with another VLCC heading to berth at one of the Juaymah SBM offshore mooring systems
Refinitiv ship tracking data showing at least 11 ships currently waiting to load from Ras Tanura / Juaymah as disruption has resulted in a pile up of VLCCs
Saudi Arabia needing to draw out of reserves to meet commitments but low stocks will add to pressure
A reminder: here’s our latest news story on the Saudi attacks:A reminder: here’s our latest news story on the Saudi attacks:
Saudi Arabia oil attack: Trump hints at action as US points finger at IranSaudi Arabia oil attack: Trump hints at action as US points finger at Iran
US diplomat Richard Haass, who chairs the Council on Foreign Relations think tank, has tweeted about the Saudi attacks:US diplomat Richard Haass, who chairs the Council on Foreign Relations think tank, has tweeted about the Saudi attacks:
We not only have the fog of war in the Middle East as to the attacks on Saudi oil, but also the fog of foreign policy when it comes to the United States. Potus accuses Iran w/o clear evidence, denies readiness for Iran talks w/o preconditions, and still has no clear aims re IranWe not only have the fog of war in the Middle East as to the attacks on Saudi oil, but also the fog of foreign policy when it comes to the United States. Potus accuses Iran w/o clear evidence, denies readiness for Iran talks w/o preconditions, and still has no clear aims re Iran
to be sure, oil prices spiking in wake of attack on Saudi facilities. but bigger story is relative modesty of impact on oil/stock markets. attack would have had far bigger impact a decade ago, but Permian Basin, strategic reserves, slower growth have added meaningful cushion.to be sure, oil prices spiking in wake of attack on Saudi facilities. but bigger story is relative modesty of impact on oil/stock markets. attack would have had far bigger impact a decade ago, but Permian Basin, strategic reserves, slower growth have added meaningful cushion.
Over in New York, shares in oil companies have jumped, but airlines are sliding.Over in New York, shares in oil companies have jumped, but airlines are sliding.
Exxon Mobile (+1.4%) and Chevron (+1.3%) are leading the risers on the Dow Jones industrial average.Exxon Mobile (+1.4%) and Chevron (+1.3%) are leading the risers on the Dow Jones industrial average.
Shale oil producers are also rallying:Shale oil producers are also rallying:
Shares of U.S. shale producers now surging.https://t.co/qEIDGJvgSY by @racheladhe & @tina_davis pic.twitter.com/cUyCuMI604Shares of U.S. shale producers now surging.https://t.co/qEIDGJvgSY by @racheladhe & @tina_davis pic.twitter.com/cUyCuMI604
American Airlines is dragging the market down though, down 5%, with Delta Air down 2.7%.American Airlines is dragging the market down though, down 5%, with Delta Air down 2.7%.
Big-name consumer stocks including American Express (-1.8%), Procter & Gamble (-1.6%) and Walt Disney (-1.2%) are also under pressure.Big-name consumer stocks including American Express (-1.8%), Procter & Gamble (-1.6%) and Walt Disney (-1.2%) are also under pressure.
UK ambassador to UN Karen Pierce says Armaco attack "is a violation of international law, as well as being dangerous and provocative". UK "still assessing what happened and who was responsible for the attacks." Adds hopes for international united response.UK ambassador to UN Karen Pierce says Armaco attack "is a violation of international law, as well as being dangerous and provocative". UK "still assessing what happened and who was responsible for the attacks." Adds hopes for international united response.
At over $66 per barrel, up 10% today, Brent crude is on track for its biggest one-day surge since the Gulf War in January 1991.At over $66 per barrel, up 10% today, Brent crude is on track for its biggest one-day surge since the Gulf War in January 1991.
The FT’s Adam Samson has dug into the archives....The FT’s Adam Samson has dug into the archives....
The last time oil spiked as much as it did overnight was on January 14, 1991, during the first Gulf War. The @FT ran a story on the front page saying the surge came as "traders became convinced that a conflict in the Gulf was now virtually unavoidable". Take a look -> pic.twitter.com/RrC4AyrukWThe last time oil spiked as much as it did overnight was on January 14, 1991, during the first Gulf War. The @FT ran a story on the front page saying the surge came as "traders became convinced that a conflict in the Gulf was now virtually unavoidable". Take a look -> pic.twitter.com/RrC4AyrukW
Here's a closer look at the story -> pic.twitter.com/0jlPFhcxiqHere's a closer look at the story -> pic.twitter.com/0jlPFhcxiq
Here’s Reuters take on the latest news from Saudi Arabia:Here’s Reuters take on the latest news from Saudi Arabia:
The Saudi-led military coalition battling Yemen’s Houthi movement said on Monday that the attack on Saudi oil plants was carried out by Iranian weapons and did not originate from Yemen according to preliminary findings.The Saudi-led military coalition battling Yemen’s Houthi movement said on Monday that the attack on Saudi oil plants was carried out by Iranian weapons and did not originate from Yemen according to preliminary findings.
Coalition spokesman Colonel Turki al-Malki told a press conference in Riyadh that an investigation into Saturday’s strikes, which had been claimed by the Houthi group, was still ongoing and authorities were trying to ascertain the launch location.Coalition spokesman Colonel Turki al-Malki told a press conference in Riyadh that an investigation into Saturday’s strikes, which had been claimed by the Houthi group, was still ongoing and authorities were trying to ascertain the launch location.
The conflict in Yemen has been raging since 2015, with a terrible death toll. Figures released in June showed that almost 100,000 people have been killed, including thousands through the deliberate targeting of civilians.The conflict in Yemen has been raging since 2015, with a terrible death toll. Figures released in June showed that almost 100,000 people have been killed, including thousands through the deliberate targeting of civilians.
Human cost of Yemen war laid bare as the death toll nears 100,000Human cost of Yemen war laid bare as the death toll nears 100,000
Last year, charities warned that millions of children are at risk of starvation:Last year, charities warned that millions of children are at risk of starvation:
The famine facing Yemen is a war crime – it must be investigated | Emily ThornberryThe famine facing Yemen is a war crime – it must be investigated | Emily Thornberry
#BREAKING Weapons used in Saudi attacks 'came from Iran': coalition pic.twitter.com/mMQEtUda2M#BREAKING Weapons used in Saudi attacks 'came from Iran': coalition pic.twitter.com/mMQEtUda2M
The Saudi-led coalition fighting in Yemen is giving a news conference now, and claimed that they have evidence that Iran is behind Saturday’s attacks.The Saudi-led coalition fighting in Yemen is giving a news conference now, and claimed that they have evidence that Iran is behind Saturday’s attacks.
It’s being streamed here:It’s being streamed here:
No translation, I’m afraid, but coalition spokesman Colonel Turki al-Malki has said thatNo translation, I’m afraid, but coalition spokesman Colonel Turki al-Malki has said that
The coalition has the capacity to defend “vital installations”The coalition has the capacity to defend “vital installations”
Investigations into the attacks on Saudi oil facilities are “ongoing”Investigations into the attacks on Saudi oil facilities are “ongoing”
Initial indications are that the attack didn’t come from Yemen...Initial indications are that the attack didn’t come from Yemen...
...and that the weapons used are Iranian...and that the weapons used are Iranian
The coalition is now studying the place where the attacks came from.The coalition is now studying the place where the attacks came from.
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.
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 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 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.
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!
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).
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
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.
“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.
“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 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.
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.
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.
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:
“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.
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?
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
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
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.
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.”
(thanks to Associated Press for the quote).
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:
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.
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.
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.