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The strike on the heartland of Saudi Arabia's oil industry, including damage to the world's biggest petroleum-processing facility, has driven oil prices to their highest level in nearly four months. Why is this so disruptive for global oil supplies? The attack on Saudi oil facilities on Saturday not only knocked out over half of the country's production, it also removed almost all the spare capacity available to compensate for any major disruption in oil supplies worldwide.
Saudi Arabia said Tuesday its oil output will return to normal by the end of September, seeking to soothe rattled energy markets after attacks on two instillations that slashed its production by half. The weekend strikes on Abqaiq –- the world's largest oil processing facility –- and the Khurais oil field in eastern Saudi Arabia roiled energy markets and revived fears of a conflict in the tinderbox Gulf region. Energy Minister Prince Abdulaziz bin Salman, who was only appointed to the role earlier this month, said that the world's top energy exporter had dipped into its strategic reserves to maintain supply to clients.
Three Aframax vessels that can carry about 750,000 barrels, and one supertanker that can hold about 2 million barrels of crude, have been chartered by Unipec tentatively, according to a shipping source and Refinitiv Eikon data. The attack on Saudi oil facilities on Saturday knocked out half of Saudi Arabia's oil production, or 5% of global output, sending prices soaring and setting off a flurry of inquiries for export cargoes out of the U.S. Gulf Coast in anticipation of a prolonged outage.
Even though weekend attacks on Saudi oil facilities cut that country's output in half, American petroleum producers appear neither ready nor willing to fill the void and capture new market share for themselves. The so-called fracking boom -- in which new technologies unlocked tremendous oil and gas deposits in shale formations -- has more than doubled US output to almost 12 million barrels per day over the last decade. The United States is now the world's largest producer and regularly exports more than three million barrels per day as well.
Midstream biggie Energy Transfer (ET) said on Monday it would buy SemGroup (SEMG) for $5.1 billion. Meanwhile, supermajor ExxonMobil (XOM) confirmed its 14th oil discovery off the coast of Guyana.
A feared rise in U.S. gasoline prices after drone attacks on Saudi oil facilities could ease up as the kingdom brings crude production back quickly.
Saudi Arabia will restore its lost oil production by the end of September and has managed to recover supplies to customers to the levels they were at prior to weekend attacks on its facilities by drawing from its huge oil inventories. Energy Minister Prince Abdulaziz bin Salman said on Tuesday that average oil production in September and October would be 9.89 million barrels per day and that the world's top oil exporter would ensure full oil supply commitments to its customers this month. "Over the past two days we have contained the damage and restored more than half of the production that was down as a result of the terrorist attack," Prince Abdulaziz told a news conference in the Red Sea city of Jeddah.
Losses for oil futures deepened on Tuesday, as Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his nation's oil production will be fully back online by the end of the month, according to CNBC. His comments follow a weekend attack on Saudi oil facilities that was estimated to have cut the kingdom's daily crude production down by 5.7 million barrels a day, sparking concerns of potentially prolonged supply shortage. October West Texas Intermediate oil was down $2.90, or 4.6%, to trade at $60 a barrel on the New York Mercantile Exchange. It rose nearly 15% Monday to settle at $62.90, the highest finish for a front-month contract since May 21, according to FactSet data. November Brent crude traded at $64.62, down $4.40, or 6.4%.
(Bloomberg) -- Saudi Arabia attempted to move beyond the worst oil disruption in its history, assuring the world that crude exports will not suffer, its damaged facility had partially restarted and production capacity would be back to normal within months.The long-awaited statement on Tuesday from the kingdom -- which before the strike pumped almost 10% of the world’s oil -- gives the market much-needed clarity after days of speculation over how severe was the damage at the Abqaiq plant. However, it’s slower progress than was initially expected and crude prices remain elevated as traders factor in higher risks for Saudi supply.“During the two past days, we managed to contain the damage by recovering more than half of the production that we had lost during that terrorist attack,” Energy Minister Prince Abdulaziz bin Salman said at a briefing in Jeddah. “Thus the company will be able to meet all its commitments to customers this month by drawing on its crude oil reserves.” Slow ProgressAbqaiq has restarted and is now processing about 2 million barrels a day, said Aramco Chief Executive Officer Amin Nasser. The facility should return to pre-attack levels of about 4.9 million barrels a day by the end of September, he said. Soon after the weekend attack, officials indicated that the majority of output would be restored within days, with weeks required to get back to full capacity. That outlook became more pessimistic in subsequent days as photos were released showing the scale of the damage at the crucial facility.Exports MaintainedThe minister and CEO assured customers that Aramco’s crude exports won’t be reduced this month because it will draw down strategic reserves. The kingdom also temporarily reduced the rate at which its domestic refineries process oil by about 1 million barrels a day, making more crude available for shipment overseas.Still, figures provided by the energy minister suggested the kingdom will take months to fully recover from the incident. Full output capacity of 12 million barrels a day will only be available at the end of November, with about 11 million restored by the end of this month, said Prince Abdulaziz. Saudi Arabia aims to pump 9.8 million barrels a day in October, he said, in line with recent months. The oil market has been gripped with uncertainty since the attack -- initially claimed by Houthi rebels in Yemen, but later blamed on Iran by the U.S. Brent crude fell 5.7% to $59.31 a barrel in London as of 7:24 p.m. The international benchmark jumped the most on record on Monday.Unprecedented DisruptionThat historic price gain underscored the unprecedented nature of the disruption caused by the attack. For decades, Saudi Arabia has been the oil market’s great stabilizer, maintaining a large cushion of spare production capacity that can be tapped in emergencies, such as the 2011 war in Libya.The halt of 5.7 million barrels day of the kingdom’s production -- the worst sudden supply loss in history -- exposed the inadequacy of the rest of the world’s supply buffer. Aramco ramped up its offshore oil fields to maximum replace some of the lost production, Nasser said. Customers were also being supplied using stockpiles, though some buyers are being asked to accept different grades of crude, a person familiar with the matter said earlier this week.But beyond the kingdom, other participants in the OPEC+ cuts, such as Russia, Kazakhstan and the United Arab Emirates, could restore a few hundred-thousand barrels a day of idled production, but not enough to offset the Saudi losses.Escalation ThreatEven as Aramco fixes the damage at Abqaiq, the possibility of further escalation of conflict in the Middle East hangs over the market.Tehran and Riyadh are historic foes that have been backing opposite sides in Yemen’s long-running civil war. The volatile situation in the region finally boiled over earlier this year as U.S. President Donald Trump used sanctions to attempt to choke off all of Iran’s oil exports -- which are the lifeblood of its economy -- after he unilaterally withdrew from an international nuclear deal.Understanding the Conflicts Leading to Saudi Attacks: QuickTakeSince then the Persian Gulf, source of about a third of the world’s seaborne oil exports, has been under siege -- targeted by air, sea and land. While Trump has shown some reluctance to go to war, there are also few prospects for easing tensions as Saudi Crown Prince Mohammed bin Salman decides how to respond to the assault.Prince Abdulaziz said he wouldn’t comment on whether Iran was responsible for the attack. The Pentagon is preparing a report on who was to blame and intends to make it public within 48 hours, a U.S. defense official said on Tuesday.Houthi rebels in Yemen, who are backed by Tehran, said on Monday that oil installations in Saudi Arabia will remain among their targets and their weapons can reach anywhere in the country. Iran’s supreme leader Ayatollah Ali Khamenei said on Tuesday that his country won’t negotiate with the U.S. on any level neither in New York or anywhere else.The threat to key Saudi infrastructure has loomed over the planned initial public offering of Aramco. The state-run company will still be ready for a share sale any time in the next 12 months, Chairman Yasser Al Rumayyan said at the briefing.(Updates with October production figure in seventh paragraph.)To contact the reporter on this story: Anthony DiPaola in Dubai at email@example.comTo contact the editors responsible for this story: James Herron at firstname.lastname@example.org, Will KennedyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The attacks on Saudi Arabia that have sent crude-oil prices surging are certainly the story for financial markets on Monday and Tuesday. Analysts at U.K. investment adviser (AJB) calculated that the last eight times that the year-over-year price growth for oil was over 100%, there was either a global recession or economic slowdown six times. It’s worth pointing out that even with the big 10% rally in crude-oil prices, Brent crude prices, trading around $65 a barrel, are still below year-earlier levels.
Reliant on crude imports from the region and heavily invested in some of Iran’s megaprojects, China stands to lose most if tensions in the Middle East escalate further
The Zacks Analyst Blog Highlights: U.S. Silica, Chevron, AngloGold Ashanti, Kinross Gold and Barrick Gold
Saudi Arabia's oil output will be fully restored quicker than thought following weekend attacks on production facilities, two sources briefed on developments said on Tuesday, taking two or three weeks not months as initial indications suggested. The kingdom is close to restoring 70% of the 5.7 million barrels per day (bpd) production lost due to the attacks, said one of the sources, a top Saudi official briefed on progress.
Most of the cruise operators are bearing the brunt of high expenses for quite some time. Increase in oil prices will further elevate their expenses.
Oil refiners in Japan, the world's fourth-biggest importer of crude oil, are gathering information on supplies from Saudi Arabia following an attack on the kingdom's key crude oil facilities over the weekend, company officials said on Tuesday. The attack on state-owned producer Saudi Aramco's crude-processing facilities at Abqaiq and Khurais cut output by 5.7 million barrels per day and threw into question its ability to maintain oil exports. Saudi Aramco has not given a specific timeline for the resumption of full output.
The average national gasoline price jumped 3 cents to $2.59 per gallon on Tuesday, AAA said on its website. Over the weekend, drones attacked Saudi Arabian oil facilities – including the world’s largest, Abqaiq. "Americans can expect local pump prices to start to increase this week.
(Bloomberg) -- Monday’s oil spike blindsided many investors, but in one corner of quant land the fallout was particularly punishing.Systematic investors known as commodity trading advisors, whose strategies track price trends across assets, held record short positions in oil and gas futures before a drone strike in Saudi Arabia sent shockwaves through global markets, according to JPMorgan Chase & Co.Brent futures soared by the most since the first Gulf War in the attack’s wake, before settling just above $69 a barrel.The record surge is merely the latest domino to fall in a miserable month for CTAs, according to Nomura, after rising bond yields hit returns last week. The SG CTA index fell for a seventh day in eight on Sept. 13, putting it on track for its fourth-worst month this century.“CTAs have seen essentially all of their trades backfire, what with the mass unwinding of bearish trades and the momentum crash in bond futures since the beginning of the month, along with the surge in the price of crude oil yesterday,” Masanari Takada, cross-asset strategist at Nomura, wrote in a note to clients. Even in comparison with other major hedge fund strategies, the performance of CTAs “has deteriorated remarkably,” he said.The question isn’t why trend-followers missed oil’s record one-day spike -- the commodity has been trading sideways for months -- but whether the rally will be solid enough to lure the fast money onto the bandwagon.Strategists at JPMorgan say that’s likely to happen, which could further juice prices. “A similar contract uplift can occur once signals for the energy futures trend turns positive,” Marko Kolanovic and Bram Kaplan wrote in a note.Oil and gas contracts have soared through key moving averages, a sign there will be “significant short covering” by CTAs, they wrote. From a macroeconomic perspective, geopolitical tensions in the Middle East and recent progress in U.S.-China trade talks should add tailwinds.TD Securities strategists led by Bart Melek also say CTAs are likely to ramp up bets on Brent and WTI futures now that the contracts have breached estimated trigger levels.The sudden market gyrations further threaten what was shaping up to be a pretty good year for trend-chasing quants. The SG CTA Index was up 12% going into September, when the worst week for government bonds in nearly three years punished the cohort’s long positions in sovereign debt.Oil’s abrupt reversal has been particularly cruel. Both the SG CTA Index’s beta to crude -- or the portion of returns attributable to it -- and official positioning data show trend-followers and macro hedge funds were betting against the commodity, according to JPMorgan.Of course, thanks to 2019’s spirited stock and bond rally, trend-followers are still up 7% this year. Societe Generale’s index tracks a basket of 20 funds.Further declines in government bonds sparked by Wednesday’s Federal Reserve meeting could spell more trouble for the group, though.“If the Fed were indeed to take a hawkish turn, the situation would be nightmarish for CTAs,” said Nomura’s Takada.To contact the reporter on this story: Justina Lee in London at email@example.comTo contact the editors responsible for this story: Samuel Potter at firstname.lastname@example.org, Yakob Peterseil, Sid VermaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
U.S. markets and stock ETFs retreated on a spike in risk-off sentiment, following the weekend attack on Saudi Arabia’s oil facilities that sent crude price surging, but strength in the energy sector helped offset some of the broader selling.
Saudi Aramco informed PetroChina on Tuesday that some of its loadings of light crude oil for October will be delayed by up to about 10 days after Saturday's attacks on the kingdom's oil facilities, according to a senior Chinese state oil source with knowledge of the matter. The weekend attack on oil processing facilities at Abqaiq and Khurais knocked out half of the oil output from the world's top exporter, sending consumers in Asia scrambling for alternatives. The Chinese state refiner was also told that some of its September-loading light crude cargoes will be swapped to heavier grades with no delays or change in volumes, the source said.
You may want to wait until prices rise more before really getting scared about the risks to your job, your budget, or the economy. Since 1980, personal incomes have risen eight times as much as oil. “$110 a barrel — that would probably be enough to put the global economy in recession,” says Steven Kopits, managing director of energy consulting firm Princeton Energy Advisors.