Oil prices surge after attacks hit Saudi Arabia's output

Oil prices surge after attacks hit Saudi Arabia's output
The Houthi attack hit two sites owned by Aramco and effectively shut down six percent of the global oil supply. (AP)
Updated 16 September 2019

Oil prices surge after attacks hit Saudi Arabia's output

Oil prices surge after attacks hit Saudi Arabia's output
  • Brent crude futures settled at $69.02 a barrel, rising $8.80, or 14.6 percent
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

NEW YORK: Oil ended nearly 15 percent higher on Monday, with Brent logging its biggest jump in over 30 years and a record trading volumes, after an attack on Saudi Arabian crude facilities cut the kingdom’s production in half and intensified concerns of retaliation in the Middle East.
Brent crude futures settled at $69.02 a barrel, rising $8.80, or 14.6 percent, its largest one-day percentage gain since at least 1988.
US West Texas Intermediate (WTI) futures ended at $62.90 a barrel, soaring $8.05, or 14.7 percent — the biggest one-day percentage gain since December 2008.
Trades also ramped up, with Brent futures surpassing 2 million lots, an all-time daily volume record, Intercontinental Exchange spokeswoman Rebecca Mitchell said.
“The attack on Saudi oil infrastructure came as a shock and a surprise to a market that had not been trading volatility and was more focused on the demand aspect over supply,” said Tony Headrick, an energy market analyst at St. Paul, Minnesota commodity brokerage CHS Hedging LLC.
“I think the tables abruptly shifted in the way of the supply outlook and that caught many that were short off guard and encouraged new length to be put in place,” Headrick said.
The Chicago Board Options Exchange’s Crude Oil Volatility Index, a gauge of options premiums based on moves in the US oil exchange traded fund, rose to 77.17, its highest level since December last year.
Saudi Arabia is the world’s biggest oil exporter and, with its comparatively large spare capacity, has been the supplier of last resort for decades.
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. The company has not given a specific timeline for the resumption of full output.
Two sources briefed on Aramco’s operations said a full return to normal production “may take months.”

Prices surged about 20 percent after the open on Sunday evening, with Brent crude posting its biggest intraday gain since the 1990-1991 Gulf crisis, before pulling back as various nations said they would tap emergency supplies to keep the world supplied with oil.
President Donald Trump approved the release of oil from the US Strategic Petroleum Reserve, which helped limit gains in oil prices.
Oil futures climbed higher during the session after the Saudi-led military coalition battling Yemen’s Houthi movement said the attack was carried out with Iranian weapons, raising the prospect of a global conflict involving the United States and Iran.
Trump also said Washington was “locked and loaded” to hit to respond to the strike, and the threat of retaliation and an escalation of tensions in the Middle East may keep prices elevated, regardless of any relief from global stockpiles.
US Ambassador to the United Nations Kelly Craft told the Security Council that emerging information on attacks on the Saudi oil facilities “indicates that responsibility lies with Iran” and that there is no evidence the attack came from Yemen.
Britain’s UN Ambassador Karen Pierce told the council: “We’re still assessing what happened and who’s responsible for the attacks. Once this has been established, we will discuss with our partners how to proceed in a responsible manner.”
Russia and China urged against hasty conclusions over the attacks.