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

  • 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.
 


Lufthansa accepts tweaked demands by Brussels over state bailout

Updated 30 May 2020

Lufthansa accepts tweaked demands by Brussels over state bailout

  • Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump

BERLIN/FRANKFURT: Lufthansa’s management board has accepted a more favorable set of demands from the European Commission in exchange for approval of a $10 billion government bailout, the carrier said on Saturday, paving the way for its rescue.
The agreement comes after the airline’s supervisory board on Wednesday rejected an initial deal with Brussels including conditions that were significantly more painful.
Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump due to the coronavirus pandemic.
Under the latest agreement, Lufthansa said it will be obliged to transfer up to 24 takeoff and landing slots for up to four aircraft to one rival each at the Frankfurt and Munich airports.
This translates into three take-off and three landing rights per aircraft and day, it said, confirming what sources had earlier told Reuters.
“For one-and-a-half years, this option is only available to new competitors at the Frankfurt and Munich airports,” Lufthansa said, initially excluding budget carrier Ryanair. “If no new competitor makes use of this option, it will be extended to existing competitors at the respective airports.”
The previous deal had included forfeiting 72 slots used by 12 of 300 jets based at the Frankfurt and Munich airports, a source familiar with the matter said.
The slots, to be allocated in a bidding process, can be taken over only by a European peer that has not received any substantial state aid during the pandemic, Lufthansa said.
The Commission said once it has been officially notified by Germany on the aid package it will assess the issue as a matter of priority.
“(Lufthansa’s remedies will) enable a viable entry or expansion of activities by other airlines at these airports to the benefit of consumers and effective competition,” it said in a statement.
The airline’s supervisory board needs to approve the deal, Lufthansa said, adding it would convene an extraordinary general meeting to obtain shareholder approval for the bailout.
The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20 percent stake in Lufthansa, which could rise to 25 percent plus one share in the event of a takeover attempt. A deal would also give the government two seats on Lufthansa’s supervisory board.
Rivals such as Franco-Dutch group Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines are all seeking state aid due to the economic effects of the pandemic.
Germany, which has set up a $110 billion fund to take stakes in companies hit by the pandemic, said it plans to sell the Lufthansa stake by the end of 2023.
“The German government, Lufthansa and the European Commission have reached an important intermediate step in the aid negotiations,” the Economy Ministry said in a statement.
It said talks with the Commission over state aid would continue.