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Oil price tumbles as Saudi recovers from drone attack - business live Oil price tumbles as Saudi recovers from drone attack - business live
(about 1 hour later)
Finally, Britain’s blue-chip FTSE 100 index has ended the day where it started, down just 1 point at 7,320.
Relief at the falling oil price lifted some stocks, but this was countered by a rising pound (which pulls down multinationals’ overseas earnings).
Investors were also cautious ahead of Wednesday’s US interest rate decision.
How high could the oil price go, if full-blown conflict breaks out?
Simona Gambarini of Capital Economics think they could more than double from today’s levels. In a worst-case scenario.
She told clients:
We continue to think that US-China trade tensions and the outlook for Fed policy remain more important drivers of oil prices.
Nonetheless, we would not rule out entirely the possibility of an escalation in tensions, leading to an outright conflict in the Middle East. In that case, we would not be surprised to see oil prices reach, and perhaps even rise above, $150 per barrel by end-2019.
Intriguingly, the top Saudi source who spoke to Reuters also said Saudi Aramco had recovered “very fast” from the crisis, which highlights the “real value” of the company.Intriguingly, the top Saudi source who spoke to Reuters also said Saudi Aramco had recovered “very fast” from the crisis, which highlights the “real value” of the company.
That could, perhaps, show that Riyadh is keen to shore up confidence in Aramco, and not allow its upcoming stock market flotation to be ruined by the attacks.That could, perhaps, show that Riyadh is keen to shore up confidence in Aramco, and not allow its upcoming stock market flotation to be ruined by the attacks.
“The Hard Break on oil was caused by an official known as a ‘top Saudi Source’ that said that Saudi Arabia is close to restoring 70% of the 5.7 million barrels lost due to attack.” @EnergyPhilFlynn“The Hard Break on oil was caused by an official known as a ‘top Saudi Source’ that said that Saudi Arabia is close to restoring 70% of the 5.7 million barrels lost due to attack.” @EnergyPhilFlynn
“...Saudi Arabian oil output will back on line in 2 to 3 weeks. The Official did not address how this might not happen again. The Source also seemed to be touting the Saudi Aramco IPO by saying the recovery shows the real value of the company” @EnergyPhilFlynn“...Saudi Arabian oil output will back on line in 2 to 3 weeks. The Official did not address how this might not happen again. The Source also seemed to be touting the Saudi Aramco IPO by saying the recovery shows the real value of the company” @EnergyPhilFlynn
Despite this sudden reversal, oil is still up around 7% compared with Friday night, before a swarm of drones attacked the Abqaiq oil facility.Despite this sudden reversal, oil is still up around 7% compared with Friday night, before a swarm of drones attacked the Abqaiq oil facility.
That suggests oil is now seen as a riskier asset, with a greater risk of military conflict in the Gulf region.That suggests oil is now seen as a riskier asset, with a greater risk of military conflict in the Gulf region.
And no wonder, with US senator Lindsey Graham yesterday suggesting an attack on Iran’s oil refineries to “break the regime’s back”:And no wonder, with US senator Lindsey Graham yesterday suggesting an attack on Iran’s oil refineries to “break the regime’s back”:
Sen. Lindsey Graham on possible response to attack on Saudi oil facilities: "The target list I would put … would be the Iranian oil refineries. Nobody is talking about invading Iran, but we want to make them pay a price for trying to disrupt world order” pic.twitter.com/uVmff7fWFGSen. Lindsey Graham on possible response to attack on Saudi oil facilities: "The target list I would put … would be the Iranian oil refineries. Nobody is talking about invading Iran, but we want to make them pay a price for trying to disrupt world order” pic.twitter.com/uVmff7fWFG
Oil drops 6% on report Saudi oil output will return to normal faster than initially anticipated#Oil #CrudeOil #Crude #barrels #brent #nymex #USOil #SaudiArabia #SaudiAramco #saudiattack pic.twitter.com/CWbw4qO1rqOil drops 6% on report Saudi oil output will return to normal faster than initially anticipated#Oil #CrudeOil #Crude #barrels #brent #nymex #USOil #SaudiArabia #SaudiAramco #saudiattack pic.twitter.com/CWbw4qO1rq
Here’s the Reuters news story that send oil prices tumbling a few minutes ago:Here’s the Reuters news story that send oil prices tumbling a few minutes ago:
Saudi Arabia’s oil output will be fully back online quicker than initially thought following weekend attacks on production facilities, two sources briefed on the latest developments told Reuters on Tuesday.Saudi Arabia’s oil output will be fully back online quicker than initially thought following weekend attacks on production facilities, two sources briefed on the latest developments told Reuters on Tuesday.
The Kingdom is close to restoring 70% of the 5.7 million barrels per day (bpd) production lost following the attacks, one of the sources, a top Saudi source briefed on the latest developments, said.The Kingdom is close to restoring 70% of the 5.7 million barrels per day (bpd) production lost following the attacks, one of the sources, a top Saudi source briefed on the latest developments, said.
That source said output will be fully back online in the next 2-3 weeks.That source said output will be fully back online in the next 2-3 weeks.
EXCLUSIVE-#Saudi oil output to return faster than first thought-sources https://t.co/YXTKADjaZh @dmitryZ_reutersEXCLUSIVE-#Saudi oil output to return faster than first thought-sources https://t.co/YXTKADjaZh @dmitryZ_reuters
Here’s a chart showing how the price of a barrel of Brent crude has suddenly tumbled, having posted its biggest ever percentage gain on Monday.Here’s a chart showing how the price of a barrel of Brent crude has suddenly tumbled, having posted its biggest ever percentage gain on Monday.
Here’s some instant reaction to the news that the disruption to Saudi oil production could be less than feared.Here’s some instant reaction to the news that the disruption to Saudi oil production could be less than feared.
Saudi oil output to return much quicker than expected - oil prices tank Energy update:Oil - US Crude 5995 -4.32%Oil - Brent Crude 6526 -4.42%#Oil #OOTT #Brent #WTISaudi oil output to return much quicker than expected - oil prices tank Energy update:Oil - US Crude 5995 -4.32%Oil - Brent Crude 6526 -4.42%#Oil #OOTT #Brent #WTI
Oil drops 5% on report Saudi oil output will return to normal faster than initially anticipated: @CNBC pic.twitter.com/qFH0hKxIJMOil drops 5% on report Saudi oil output will return to normal faster than initially anticipated: @CNBC pic.twitter.com/qFH0hKxIJM
NEWSFLASH: The oil price is suddenly plunging.NEWSFLASH: The oil price is suddenly plunging.
Brent crude has slumped by more than four dollars per barrel, dropping back to just $64.77 -- having hit $69/barrel earlier this morning.Brent crude has slumped by more than four dollars per barrel, dropping back to just $64.77 -- having hit $69/barrel earlier this morning.
That’s a huge move -- down around 6% today (almost half of Monday’s incredible surge).That’s a huge move -- down around 6% today (almost half of Monday’s incredible surge).
US crude is also plunging, down almost $3 per barrel to $60.16.US crude is also plunging, down almost $3 per barrel to $60.16.
The sudden selloff been triggered by a Reuters report that Saudi Arabia will repair the damage from Saturday’s attack on its major production facilities sooner than expected.The sudden selloff been triggered by a Reuters report that Saudi Arabia will repair the damage from Saturday’s attack on its major production facilities sooner than expected.
Source have told Reuters thatSource have told Reuters that
Output will return to normal levels sooner than thoughtOutput will return to normal levels sooner than thought
Output will be “fully back online” in the next two to three weeksOutput will be “fully back online” in the next two to three weeks
Saudi is close to restoring 70% of the 5.7m barrels per day lostSaudi is close to restoring 70% of the 5.7m barrels per day lost
Impact on oil exports has been minimal, thanks to Saudi’s Aramco’s oil storageImpact on oil exports has been minimal, thanks to Saudi’s Aramco’s oil storage
More to follow!More to follow!
Crude & brent oil plunge after Reuters, citing a source, reports that Saudi oil output will be fully back online in the next 2-3 weekshttps://t.co/qT4SPEEuYR pic.twitter.com/mLzbLYHf3vCrude & brent oil plunge after Reuters, citing a source, reports that Saudi oil output will be fully back online in the next 2-3 weekshttps://t.co/qT4SPEEuYR pic.twitter.com/mLzbLYHf3v
The New York stock exchange has dipped into the red at the start of trading, adding to yesterday’s declines.The New York stock exchange has dipped into the red at the start of trading, adding to yesterday’s declines.
The Dow Jones industrial average is down 89 points or 0.33%, as worries about the Middle East mount.The Dow Jones industrial average is down 89 points or 0.33%, as worries about the Middle East mount.
U.S. stocks open lower https://t.co/sPi2Ofe7U5 pic.twitter.com/BI2iASKaIYU.S. stocks open lower https://t.co/sPi2Ofe7U5 pic.twitter.com/BI2iASKaIY
Here’s a video clip of Iran’s supreme leader, Ayatollah Ali Khamenei, speaking today:Here’s a video clip of Iran’s supreme leader, Ayatollah Ali Khamenei, speaking today:
It’s important to remember just how big Saudi Aramco is.
As this chart from the Economist shows, Aramco produces nearly as much oil as Shell, Exxon, Total and Chevron put together.
And given the relatively low cost of extracting crude in Saudi Arabia, it makes more profits than that quartet -- plus BP as well.
How important is Saudi Aramco to global oil business? … well … add up all the Western oil majors and that gives you an idea. https://t.co/h1WXVg0h6X pic.twitter.com/XFhnjRreY5
So by hitting than half of Aramco’s production capacity, last weekend’s attacks have had a serious impact.
King Salman bin Abdulaziz chairs the Cabinet's session, He expresses thanks and appreciation to the leaders of countries, officials of states, regional and international organizations and all those who expressed condemnation of the sabotage attack on two Aramco plants#Saudi pic.twitter.com/DMynKPdnHD
Saudi Arabia’s King Salman has insisted that Riyadh can deal with the consequences of the attacks on its oil production installations.
King Salman chaired a meeting of Saudi ministers today, where the cabinet reviewed the damage.
In a statement, the cabinet said the Saudi Kingdom vowed to “defend its land and vital installations”, and that Saturday’s attack was intended to disrupt global oil supplies.
The cabinet also called on world governments to confront the attacks on Aramco’s production facilities “regardless of their origin” (thanks to Reuters for the quotes).
#BREAKING: King Salman of #Saudi Arabia: Saudi Arabia will defend its territory and facilities no matter where these attacks come from
Earlier today Iran’s supreme leader ruled out negotiations with the US “at any level”, claiming that Donald Trump’s Middle East strategy was “worthless”.
Ayatollah Ali Khamenei was speaking a day after Washington blamed Tehran for attacks on Saudi oil installations.
The AFP newswire has more details:
Ayatollah Ali Khamenei said the US adopted a policy of “maximum pressure” on Iran because it believes it cannot bring the Islamic republic to its knees through other means.
The leader was speaking after devastating drone attacks at the weekend that halved oil output of Iran’s regional arch-rival Saudi Arabia - the world’s top crude exporter.
“The policy of ‘maximum pressure’ against the Iranian nation is worthless and all Islamic Republic of Iran officials unanimously believe there will be no negotiations with the US at any level,” he said in a televised address.
Tensions between Iran and the US and its allies have threatened to boil over since May last year when President Donald Trump abandoned a 2015 nuclear deal and began reimposing sanctions in its campaign of “maximum pressure”.
The rising tensions in the Middle East, with Iran seizing several oil tankers and Houthi rebels attacking Saudi targets, had already hurt the markets.
Shares have been dropping in Riyadh in recent weeks, and have now lost all this year’s gains:
Saudi Arabian stocks sank after drone strikes highlighted the vulnerability of the kingdom’s oil facilities to terrorist attacks https://t.co/cyakaH4H54 pic.twitter.com/jXEkezKedf
Back in the UK, plans for a huge mine on the North Yorkshire Moors have been plunged into doubt, putting over 1,000 jobs at risk.
It’s also a blow to thousands of small investors, many living in the area, who had backed Sirius Minerals’ plan to mine fertiliser.
Sirius cancelled a $500m bond sale, to fund the project, this morning. It said it was struggling to sell the bond, and will now hold a “comprehensive strategic review” over its future. It also said the UK government had declined to provide financial support.
The news sent Sirius’s shares plunging over 50%.
Plan for huge Yorkshire mine in doubt as firm pulls £400m bond sale citing poor market conditions and lack of government support https://t.co/J66Wk6Gavn
Many Middle Eastern stock market have lost ground today -- not terribly surprising, with Donald Trump’s threat of military retaliation hanging over the region.
Saudi Arabia’s Tadawul index is down 1%, led by natural resources companies and energy producers. Bank shares also dropped.
Across the region, Egypt’s EGX 30 shed 0.8%, while the UAE’s DFM index has lost 1%.
David Madden, market analyst at CMC Markets UK, sums up the morning:
This morning equity markets are mixed as traders remain cautious about the political situation in the Middle East. Tensions in the region have been heightened in the wake of the attack in Saudi Arabia over the weekend.
Oil is a touch lower after the mammoth move yesterday, but it is massively up on the week, and that highlights the fear about disruption to production.
The macroeconomic outlook is a little soft, as the Chinese economy is slowing down, the German manufacturing sector is in contraction, plus the uncertainty in relation to Brexit, so higher oil prices are likely to make matters worse for the global economy.
Could Saudi Aramco follow WeWork’s lead, and delay its IPO?
Saturday’s attacks have thrown Aramco’s stock market float plans into fresh uncertainty. Investors must be more concerned that its oil facilities are vulnerable to attack, and concerned that geopolitical risks are rising.
Piers Hillier, chief investment officer at Royal London Asset Management, says investors will probably demand a higher “risk premium” when Aramco eventually comes to market.
“Oil futures curves for 3-10 years out have moved up about $1.25 from around the $50 mark. So while the spot market has jumped, reflecting near-term impacts on immediate oil availability and supply chain issues, the longer-term price has taken this in its stride, up 2-3%, with a modest bump up in prices, leading to an uptick in oil stocks or around 3-4%.
It would seem logical that Aramco’s IPO will be delayed while the damage is assessed but beyond this we would expect that the risk premium that investors will require should the IPO go ahead will now be higher.”
Saudi Aramco has reportedly warned some clients that there will be delays to their oil deliveries, following last weekend’s attack.
According to Bloomberg, at least four clients have been warned to expect delays of either days, or weeks. But, they’ve also been reassured that they’ll get their order eventually
Reuters has more details:
Saudi Aramco informed PetroChina on Tuesday that its loadings of light crude oil for October will be delayed by about 10 days, said a senior Chinese state oil source with knowledge of the matter.
However, Aramco, the state oil company of Saudi Arabia, will still supply the same grades and volumes of light crude oil requested for October nominations, the source said.
The Chinese state refiner was also told that its September-loading light crude cargoes will be swapped to heavier grades with no change in volumes or delays, the source said.
“The (loading dates and volumes of) September cargoes are too prompt to be changed, as Aramco may be still assessing the damages to its facilities,” said the source.