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.
 


Egypt to press ahead with sale of stakes in state companies — govt adviser

Updated 2 min 40 sec ago

Egypt to press ahead with sale of stakes in state companies — govt adviser

  • The government has been talking for years about selling the stakes but has repeatedly postponed the program
  • The government set up NI Capital in late 2015 as a state-owned financial services company to help it navigate financial markets

CAIRO: Egypt is fully committed to its program to sell minority stakes in state companies and is tackling a number of issues that have held it up, a government adviser on the share sales said on Thursday.
The government has been talking for years about selling the stakes but has repeatedly postponed the program, raising doubts among some economists about its commitment to privatization.
“From the meetings I attend on a weekly basis, the government is as keen as I have ever seen them on proceeding with the privatization program,” Mohamed Metwally, CEO of NI Capital, told Reuters.
“There has never been slack on this. It’s just a matter of sometimes you face things that take longer to prepare than expected,” said Metwally in his first interview with the media since taking over as NI Capital’s CEO in July.
The government set up NI Capital in late 2015 as a state-owned financial services company to help it navigate financial markets.
The government announced in 2016 that it was selling company stakes, with some to be sold by the end of that year. Since then it has sold only 4.5% of one company, tobacco monopoly Eastern Company in a transaction in March.
Metwally said the delays had been caused by weak markets, legal hurdles, the readiness of each company’s financial documentation and in the case of some companies a downturn in the business cycle.
Egypt last year released a list of 23 state-controlled companies to be brought to market as an initial batch.
The first sales will be companies already trading on the Egyptian Exchange, most likely Abu Qir Fertilizers and Chemicals Industries and Alexandria Container and Cargo Handling Co., sources familiar with the planned transactions told Reuters.
Metwally, citing reasons of financial compliance, declined to discuss individual companies before they reached the market.
He said stake sales could raise around 40 billion Egyptian pounds, roughly equal to 5% of the stock market’s current capitalization of 750 billion-800 billion pounds.
Among the hurdles bringing companies to market has been a tangle of ownership structures, with different entities requiring different legal processes for selling their assets.
“We had a few transactions that were held up by this process, but now it’s behind us,” Metwally said.
A potential future delay to the Egyptian share sales could be the initial public offering of Saudi Arabia’s state oil company Aramco, which may be announced as early as next week.
“Right now liquidity is being sucked out of the market because of anticipation of the Aramco offering,” Metwally said.
If the Aramco sale raises more than $25 billion, it would make it the world’s biggest IPO.
“Now should it (the Egyptian sales) happen, let’s say, in November, or wait till January or February when the Aramco IPO is out of the way?” he said.
Another stumbling block has been the trade war between China and the United States, which by creating a glut in products sold by some of the companies reduced their prices by 30-40% and temporarily lowered valuations, Metwally said.
He said these issues were all being resolved, paving the way for a possibly rapid roll-out.
“Progress is happening in every single transaction,” he said.
“That might put us in a high-quality problem in the future, in which they’re all ready at the same time, and we’ll just have to schedule them one after the other as part of our capital markets management process.”