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| Oil price posts biggest spike on record after Saudi drone attack – business live | Oil price posts biggest spike on record after Saudi drone attack – business live |
| (32 minutes later) | |
| Kit Juckes of French bank Société Générale says the loss of half Saudi Arabia’s oil production has left the markets with three questions: | |
| How fast can supply recover, can further attacks be prevented, and what will the wider geopolitical implications be? Oil prices spiked higher but drifted down into the European open. | |
| However, even for those who aren’t sceptical about Saudi claims to be able to restore a third of the lost output as early as today, there is bound to be a higher risk premium attached to prices going forwards. | |
| Slower global growth was beginning to act as a drag on oil prices, but the risk premium goes the other way and that in turn is another drag on global growth | |
| The Daily Telegraph predicts that petrol prices will rise quickly, as the impact of today’s crude oil move feeds through to the forecourt. | |
| They say: | |
| Markets are braced for a spike in the cost of crude, and analysts expect the costs of the crisis to be felt at the pumps almost immediately. | |
| Ashley Kelty, a veteran oil and gas analyst, said he would expect petrol prices to jump “at least 5p per gallon in the coming days and further hikes to come as news comes out on the longer term impact of the Saudi outage”. | |
| More here: | |
| It should take a few weeks for oil bought today to be refined, shipped and sold. The BBC’s John Campbell suspects some suppliers aren’t hanging about, though: | |
| Looks like consumers are already feeling the impact of the Saudi oil attack. A major provider of home heating oil in Northern Ireland increased prices by around 5% overnight. | |
| Just over an hour into European trading. No surprise, oil and gas companies topping the Stoxx 600 #OOTT pic.twitter.com/b94Qj8wubB | Just over an hour into European trading. No surprise, oil and gas companies topping the Stoxx 600 #OOTT pic.twitter.com/b94Qj8wubB |
| Hussein Sayed, chief market strategist at FXTM, believes rising tensions in the Middle East could push the oil price as high as $100 per barrel. | Hussein Sayed, chief market strategist at FXTM, believes rising tensions in the Middle East could push the oil price as high as $100 per barrel. |
| Crude hasn’t been that high since 2014, and it would take a 50% surge to get back there. | Crude hasn’t been that high since 2014, and it would take a 50% surge to get back there. |
| That may seem extreme, but a prolonged period of disruption could push prices sharply high, Sayed argues. | That may seem extreme, but a prolonged period of disruption could push prices sharply high, Sayed argues. |
| That’s because the oil market is now suddenly undersupplied, having lost 5% of supplies overnight. | That’s because the oil market is now suddenly undersupplied, having lost 5% of supplies overnight. |
| Sayed says: | Sayed says: |
| Three days ago, oil prices hitting $100 a barrel was almost an impossible scenario. Not anymore. That’s not just because of the current disruption from Saudi Arabia, but the fact that the chances of military conflict in the region have risen dramatically. US Secretary of State Mike Pompeo blamed Iran for the drone attacks, and Republican Senator Lindsey Graham said the United States should consider an attack on Iran’s oil refineries. Meanwhile President Trump warned that the US is ‘locked and loaded’. If such statements continue to flow from the US administration, geopolitical risk premium would increase significantly as any strike against Iran may put the whole Gulf region in jeopardy. | Three days ago, oil prices hitting $100 a barrel was almost an impossible scenario. Not anymore. That’s not just because of the current disruption from Saudi Arabia, but the fact that the chances of military conflict in the region have risen dramatically. US Secretary of State Mike Pompeo blamed Iran for the drone attacks, and Republican Senator Lindsey Graham said the United States should consider an attack on Iran’s oil refineries. Meanwhile President Trump warned that the US is ‘locked and loaded’. If such statements continue to flow from the US administration, geopolitical risk premium would increase significantly as any strike against Iran may put the whole Gulf region in jeopardy. |
| If investors begin pricing in the possibility of an attack against Iran’s crude infrastructure, oil may quickly hit the $100 benchmark. | If investors begin pricing in the possibility of an attack against Iran’s crude infrastructure, oil may quickly hit the $100 benchmark. |
| $FTSE all sectors in red except energy pic.twitter.com/MphttzHlg5 | $FTSE all sectors in red except energy pic.twitter.com/MphttzHlg5 |
| Britain’s foreign secretary, Dominic Raab has described the attacks as ‘despicable’ - but was cautious about whether the UK could take part in any military response. | Britain’s foreign secretary, Dominic Raab has described the attacks as ‘despicable’ - but was cautious about whether the UK could take part in any military response. |
| He told Sky News: | He told Sky News: |
| The attack on the Aramco installations was a wanton violation of international law | The attack on the Aramco installations was a wanton violation of international law |
| It’s despicable. We stand firmly in support of our Saudi partners and the other international players and countries in the region. | It’s despicable. We stand firmly in support of our Saudi partners and the other international players and countries in the region. |
| Raab says it was “not entirely clear who is responsible”, but he hopes to get a “very clear picture” shortly | Raab says it was “not entirely clear who is responsible”, but he hopes to get a “very clear picture” shortly |
| Q: Could we provide military support to Saudi Arabie? | Q: Could we provide military support to Saudi Arabie? |
| Raab says it’s too early for such a question. We need to get the full facts first, and he’s not going to prejudge until we have them. | Raab says it’s too early for such a question. We need to get the full facts first, and he’s not going to prejudge until we have them. |
| Q: How worried should we be about volatility in the markets? | Q: How worried should we be about volatility in the markets? |
| We’ll have to see how the situation plays out this week, Raab replies. | We’ll have to see how the situation plays out this week, Raab replies. |
| It was a very serious attack on Saudi Arabia which has implications for the global oil market and supplies, he said, adding: | It was a very serious attack on Saudi Arabia which has implications for the global oil market and supplies, he said, adding: |
| It’s a very serious and outrageous act. It needs as clear and united international response as possible. | It’s a very serious and outrageous act. It needs as clear and united international response as possible. |
| Shares in oil companies have jumped this morning, following the jump in crude prices. | Shares in oil companies have jumped this morning, following the jump in crude prices. |
| BP is the top riser on the FTSE 100, up 3.8%, closely followed by Royal Dutch Shell which is 2.8% higher. Smaller oil producers are also sharply higher. | BP is the top riser on the FTSE 100, up 3.8%, closely followed by Royal Dutch Shell which is 2.8% higher. Smaller oil producers are also sharply higher. |
| BAE Systems, the weapons maker, has gained 0.7% -- suggesting traders are anticipating heightened military tensions. | BAE Systems, the weapons maker, has gained 0.7% -- suggesting traders are anticipating heightened military tensions. |
| But most stocks are down this morning, knocking 0.5% or 35 points off the FTSE 100 in early trading. | But most stocks are down this morning, knocking 0.5% or 35 points off the FTSE 100 in early trading. |
| Airline, though, are suffering. British Airways’ parent company, IAG, is down 2.2%, and easyJet has lost 2.5%. | Airline, though, are suffering. British Airways’ parent company, IAG, is down 2.2%, and easyJet has lost 2.5%. |
| Concerns is swirling that the jump in the oil price could hurt global growth, and possibly trigger a downturn. | Concerns is swirling that the jump in the oil price could hurt global growth, and possibly trigger a downturn. |
| Robin Bew of the Economist Intelligence Unit points out that the world economy was already looking vulnerable: | Robin Bew of the Economist Intelligence Unit points out that the world economy was already looking vulnerable: |
| The world economy was already under pressure from the trade war and high leverage. And now we have an oil price spike. Almost seems quaint these days, but the linkage between oil and growth generally strong. | The world economy was already under pressure from the trade war and high leverage. And now we have an oil price spike. Almost seems quaint these days, but the linkage between oil and growth generally strong. |
| Ranko Berich, Head of Market Analysis at Monex Europe, agrees -- calling the jump in crude prices ‘ominous’. | Ranko Berich, Head of Market Analysis at Monex Europe, agrees -- calling the jump in crude prices ‘ominous’. |
| The weekend’s attacks in Saudi Arabia will have two consequences for financial markets and the global economy: the immediate oil price shock, which has already hit, and the longer-term costs of increased tensions or even a possible outbreak of conflict in the Persian Gulf. | The weekend’s attacks in Saudi Arabia will have two consequences for financial markets and the global economy: the immediate oil price shock, which has already hit, and the longer-term costs of increased tensions or even a possible outbreak of conflict in the Persian Gulf. |
| “The size of the initial shock to oil prices was immense. Spot prices have surged by amounts unprecedented since the 1990 Iraq invasion of Kuwait, while Brent crude oil futures recorded their largest intraday surge since trading began in 1988, although since then the initial knee jerk surge has been pared bac | “The size of the initial shock to oil prices was immense. Spot prices have surged by amounts unprecedented since the 1990 Iraq invasion of Kuwait, while Brent crude oil futures recorded their largest intraday surge since trading began in 1988, although since then the initial knee jerk surge has been pared bac |
| Craig Erlam, senior market analyst at trading firm OANDA, warns that the world economy could be tipped into a downturn. | Craig Erlam, senior market analyst at trading firm OANDA, warns that the world economy could be tipped into a downturn. |
| The attack was as severe as it was unexpected but that’s not the worst thing about it. Saudi Arabia believes a significant proportion of the outages can be back online in a few days while Trump also approved release of supplies from the Strategic Petroleum Reserve to ensure the market remains well surprised. | The attack was as severe as it was unexpected but that’s not the worst thing about it. Saudi Arabia believes a significant proportion of the outages can be back online in a few days while Trump also approved release of supplies from the Strategic Petroleum Reserve to ensure the market remains well surprised. |
| None of this should make us feel relaxed about the potential for further attacks though and the longer-term implications on the oil market. Spikes in oil prices when the global economy is already flirting with the idea of recession is not ideal and, if repeated and sustained, could ultimately be what tips us over the edge. | None of this should make us feel relaxed about the potential for further attacks though and the longer-term implications on the oil market. Spikes in oil prices when the global economy is already flirting with the idea of recession is not ideal and, if repeated and sustained, could ultimately be what tips us over the edge. |
| Saudi Aramco, the oil giant, has told Indian refiners that there will be no shortage in supplies, according to the Indian oil ministry (Reuters reports from New Delhi). | Saudi Aramco, the oil giant, has told Indian refiners that there will be no shortage in supplies, according to the Indian oil ministry (Reuters reports from New Delhi). |
| Although today’s 20% spike is the biggest intraday move under modern trading, there have been dramatic shifts in the past. | Although today’s 20% spike is the biggest intraday move under modern trading, there have been dramatic shifts in the past. |
| Back in 1973, the Opec cartel doubled the price of oil overnight (from $5.12 a barrel to $11.65). That created a huge inflation shock, and even forced America to lower its speeding limits to preserve gasoline supplies. | Back in 1973, the Opec cartel doubled the price of oil overnight (from $5.12 a barrel to $11.65). That created a huge inflation shock, and even forced America to lower its speeding limits to preserve gasoline supplies. |
| Here’s a chart showing how oil made its biggest intraday jump since the crude futures contract was created over 30 years ago: | Here’s a chart showing how oil made its biggest intraday jump since the crude futures contract was created over 30 years ago: |
| Ipek Ozkardeskaya, senior market analyst at London Capital Group, explains: | Ipek Ozkardeskaya, senior market analyst at London Capital Group, explains: |
| Brent crude jumped 19%, as WTI crude surged 15% at the weekly opening bell, after a drone attack on Saudi Arabia’s state oil company Aramco halved the country’s production over the weekend. This has been the biggest one-time disruption in oil supply in the history, which has resulted in the largest single jump in prices in record.... | Brent crude jumped 19%, as WTI crude surged 15% at the weekly opening bell, after a drone attack on Saudi Arabia’s state oil company Aramco halved the country’s production over the weekend. This has been the biggest one-time disruption in oil supply in the history, which has resulted in the largest single jump in prices in record.... |
| The Saudi incident increased tensions between the US and Iran, as the US accused Iran of the drone strikes on Aramco. Iran refused. But regardless of who is responsible for these attacks, the US accusations on Iran can only wash away the hopes for improved diplomatic relations between the two countries following Bolton’s departure last week. Hence, oil prices should settle higher than their pre-attack levels. | The Saudi incident increased tensions between the US and Iran, as the US accused Iran of the drone strikes on Aramco. Iran refused. But regardless of who is responsible for these attacks, the US accusations on Iran can only wash away the hopes for improved diplomatic relations between the two countries following Bolton’s departure last week. Hence, oil prices should settle higher than their pre-attack levels. |
| The 20% surge in the oil price this morning is the biggest intraday move since the Brent crude contract was created in the 80s, according to Bloomberg. | The 20% surge in the oil price this morning is the biggest intraday move since the Brent crude contract was created in the 80s, according to Bloomberg. |
| It says: | It says: |
| Oil posted its biggest ever intraday jump this morning, to more than $71 a barrel after a strike on a Saudi Arabian oil facility removed about 5% of global supplies, an attack the U.S. has blamed on Iran. | Oil posted its biggest ever intraday jump this morning, to more than $71 a barrel after a strike on a Saudi Arabian oil facility removed about 5% of global supplies, an attack the U.S. has blamed on Iran. |
| In an extraordinary start to trading on Monday, London’s Brent futures leapt almost $12 in the seconds after the open, the most in dollar terms since they were launched in 1988. Prices have since pulled back about half of that initial surge of almost 20%, but were still heading for the biggest advance in more than three years. | In an extraordinary start to trading on Monday, London’s Brent futures leapt almost $12 in the seconds after the open, the most in dollar terms since they were launched in 1988. Prices have since pulled back about half of that initial surge of almost 20%, but were still heading for the biggest advance in more than three years. |
| “We have never seen a supply disruption and price response like this in the oil market,” said Saul Kavonic, an energy analyst at Credit Suisse Group AG. “Political risk premium are now back on the oil market agenda.” | “We have never seen a supply disruption and price response like this in the oil market,” said Saul Kavonic, an energy analyst at Credit Suisse Group AG. “Political risk premium are now back on the oil market agenda.” |
| More here: Oil Jumps Most on Record After Attack Cuts Saudi Arabian Supply | More here: Oil Jumps Most on Record After Attack Cuts Saudi Arabian Supply |
| Here’s our news story on the Saudi attacks: | Here’s our news story on the Saudi attacks: |
| Trump says US 'locked and loaded' after Saudi Arabia attack, as oil prices soar | Trump says US 'locked and loaded' after Saudi Arabia attack, as oil prices soar |
| Donald Trump has tried to calm the oil market, by opening the taps on America’s stocks of crude oil. | Donald Trump has tried to calm the oil market, by opening the taps on America’s stocks of crude oil. |
| That could mitigate the impact of losing half of Saudi Arabia’s production, for an unknown time. | That could mitigate the impact of losing half of Saudi Arabia’s production, for an unknown time. |
| Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount.... | Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount.... |
| ....sufficient to keep the markets well-supplied. I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States. | ....sufficient to keep the markets well-supplied. I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States. |
| Trump also warned that America is “locked and loaded” to retaliate, which will not calm nerves in the City. | Trump also warned that America is “locked and loaded” to retaliate, which will not calm nerves in the City. |
| Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed! | Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed! |
| PLENTY OF OIL! | PLENTY OF OIL! |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Fears of escalating conflict in the Middle East are gripping the markets this morning, following the drone attack on Saudi Arabia’s biggest oil production facility on Saturday. | Fears of escalating conflict in the Middle East are gripping the markets this morning, following the drone attack on Saudi Arabia’s biggest oil production facility on Saturday. |
| The attacks leave Saudi Arabia facing weeks without full crude and gas production capacity, and ratchet up the geopolitical tensions in the region. | The attacks leave Saudi Arabia facing weeks without full crude and gas production capacity, and ratchet up the geopolitical tensions in the region. |
| The oil price has surged 10% this morning (it was up 20% at one stage!) amid fears of disruption to energy supplies. | The oil price has surged 10% this morning (it was up 20% at one stage!) amid fears of disruption to energy supplies. |
| Brent crude oil hit $71.95 for the first time since May, and is currently changing hands at $66.63 per barrel, up from just $60 on Friday night. | Brent crude oil hit $71.95 for the first time since May, and is currently changing hands at $66.63 per barrel, up from just $60 on Friday night. |
| This will push up fuel and heating costs -- lifting inflation and potentially weakening the global economy at a critical moment. | This will push up fuel and heating costs -- lifting inflation and potentially weakening the global economy at a critical moment. |
| Brent #oil up almost 10%, after rising as much as 20%, after #SaudiArabia oil installation attack. pic.twitter.com/9soWZH5jlZ | Brent #oil up almost 10%, after rising as much as 20%, after #SaudiArabia oil installation attack. pic.twitter.com/9soWZH5jlZ |
| Houthi rebels based in Yemen have claimed responsibility for the attack, saying they used 10 drones to knock out facilities at two sites, creating a huge fire. | Houthi rebels based in Yemen have claimed responsibility for the attack, saying they used 10 drones to knock out facilities at two sites, creating a huge fire. |
| Major Saudi Arabia oil facilities hit by Houthi drone strikes | Major Saudi Arabia oil facilities hit by Houthi drone strikes |
| The attack has real consequences for the global economy, taking about 5% of production offline. The production facilities at Abqaiq and Khurais produce more than half of Saudi Arabia’s oil -- which makes up 10% of global supplies. | The attack has real consequences for the global economy, taking about 5% of production offline. The production facilities at Abqaiq and Khurais produce more than half of Saudi Arabia’s oil -- which makes up 10% of global supplies. |
| It also raises the tensions between the US and Iran, with Washington blaming Tehran for the attack. | It also raises the tensions between the US and Iran, with Washington blaming Tehran for the attack. |
| Secretary of State Mike Pompeo declared: | Secretary of State Mike Pompeo declared: |
| “Iran has now launched an unprecedented attack on the world’s energy supply.” | “Iran has now launched an unprecedented attack on the world’s energy supply.” |
| Iran denied the charge, with its foreign minister accusing Pompeo of “blind accusations and inappropriate comments”. | Iran denied the charge, with its foreign minister accusing Pompeo of “blind accusations and inappropriate comments”. |
| Financial experts are worried. Royal Bank of Canada’s Helima Croft says this attack is the most serious assault to date on the country’s energy infrastructure. | Financial experts are worried. Royal Bank of Canada’s Helima Croft says this attack is the most serious assault to date on the country’s energy infrastructure. |
| RBC says: | RBC says: |
| Though Aramco officials have indicated that exports will resume in the next few days, there is nothing to suggest that this is a one-off event and that the Iranian-backed Houthi rebels will forgo further strikes on Saudi sites. | Though Aramco officials have indicated that exports will resume in the next few days, there is nothing to suggest that this is a one-off event and that the Iranian-backed Houthi rebels will forgo further strikes on Saudi sites. |
| European stock markets are expected to drop, with the main indices called down between 0.3% and 0.6%. | European stock markets are expected to drop, with the main indices called down between 0.3% and 0.6%. |
| European Opening Calls:#FTSE 7345 -0.30%#DAX 12372 -0.77%#CAC 5618 -0.66%#MIB 22098 -0.38%#IBEX 9084 -0.59%#STOXX 3526 -0.69% | European Opening Calls:#FTSE 7345 -0.30%#DAX 12372 -0.77%#CAC 5618 -0.66%#MIB 22098 -0.38%#IBEX 9084 -0.59%#STOXX 3526 -0.69% |
| Otherwise there’s not much in the calendar, beyond a new survey of factories in the New York region. | Otherwise there’s not much in the calendar, beyond a new survey of factories in the New York region. |
| The agenda | The agenda |
| 1.30pm BST: US Empire manufacturing report | 1.30pm BST: US Empire manufacturing report |